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, 2019March 31, 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
  __________________________________________________
CNX Resources Corporation
(Exact name of registrant as specified in its charter)
Delaware51-0337383
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
CNX Center
1000 CONSOL Energy Drive Suite 400
Canonsburg,, PA15317-6506
(724) (724) 485-4000
(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 classTrading Symbol(s)Name of exchange on which registered
Common Stock ($.01 par value)CNXNew York Stock Exchange
Preferred Share Purchase Rights--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. (Check one):
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  ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassShares outstanding as of April 15, 2020
Common stock, $0.01 par value187,058,569





TABLE OF CONTENTS

Page
PART I FINANCIAL INFORMATION
ClassShares outstanding as of October 15, 2019
Common stock, $0.01 par value186,586,751



TABLE OF CONTENTS

Page
PART I FINANCIAL INFORMATION
ITEM 1.Unaudited Condensed Consolidated Financial Statements
Consolidated Statements of Income for the three and nine months ended September 30,March 31, 2020 and 2019 and 2018
4
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30,March 31, 2020 and 2019 and 2018

5
Consolidated Balance Sheets at September 30, 2019March 31, 2020 and December 31, 20182019
6
Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30,March 31, 2020 and 2019 and 2018
8
Consolidated Statements of Cash Flows for the ninethree months ended September 30,March 31, 2020 and 2019 and 2018
9
10
ITEM 2.
3230
ITEM 3.
6249
ITEM 4.
6351
PART II OTHER INFORMATION
ITEM 1.
6451
ITEM 1A.Risk Factors
6451
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds
6452
ITEM 6.
6553





GLOSSARY OF CERTAIN OIL AND GAS MEASUREMENT TERMS

The following are abbreviations of certain measurement terms and abbreviations commonly used in the oil and gas industry and included within this Form 10-Q:

Bbl - One stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to oil or other liquid hydrocarbons.
Bcf - One billion cubic feet of natural gas.
Bcfe - One billion cubic feet of natural gas equivalents, with one barrel of oil being equivalent to 6,000 cubic feet of gas.
Btu - One British Thermal Unit.
BBtu - One billion British Thermal Units.
Mbbls - One thousand barrels of oil or other liquid hydrocarbons.
Mcf - One thousand cubic feet of natural gas.
Mcfe - One thousand cubic feet of natural gas equivalents, with one barrel of oil being equivalent to 6,000 cubic feet of gas.
MMbtu - One million British Thermal Units.
MMcfe - One million cubic feet of natural gas equivalents, with one barrel of oil being equivalent to 6,000 cubic feet of gas.
Tcfe - One trillion cubic feet of natural gas equivalents, with one barrel of oil being equivalent to 6,000 cubic feet of gas.
NGL - Natural gas liquids - those hydrocarbons in natural gas that are separated from the gas as liquids through the process.
net - “net” natural gas or “net” acres are determined by adding the fractional ownership working interests the Company has in gross wells or acres.
TIL - turn-in-line; a well turned to sales.
blending - process of mixing dry and damp gas in order to meet downstream pipeline specifications.
lease operating expense - costs of operating wells and equipment on a producing lease, many of which are recurring. Includes items such as water disposals, repairs and maintenance, equipment rental, and operating supplies, among others.
proved reserves - quantities of oil, natural gas, and NGLsNGL which, by analysis of geological and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.
proved developed reserves (PDPs) - proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods.
proved undeveloped reserves (PUDs) - proved reserves that can be estimated with reasonable certainty to be recovered from new wells on undrilled proved acreage or from existing wells where a relatively major expenditure is required for completion.
reservoir - a porous and permeable underground formation containing a natural accumulation of producible natural gas and/or oil that is confined by impermeable rock or water barriers and is separate from other reservoirs.
development well - a well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive.
exploratory well - a well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir. Generally, an exploratory well is any well that is not a development well, an extension well, a service well or a stratigraphic test well.
gob well - a well drilled or vent hole converted to a well which produces or is capable of producing coalbed methane or other natural gas from a distressed zone created above and below a mined-out coal seam by any prior full seam extraction of the coal.
service well - a well drilled or completed for the purpose of supporting production in an existing field. Specific purposes of service wells include, among other things, gas injection, water injection and salt-water disposal.
play - a proven geological formation that contains commercial amounts of hydrocarbons.
royalty interest - the land owner’s share of oil or gas production, historically 1/8.
throughput - the volume of natural gas transported or passing through a pipeline, plant, terminal, or other facility during a particular period. 
transportation, gathering and compression - cost incurred related to transporting natural gas to the ultimate point of sale. These costs also include costs related to physically preparing natural gas, natural gas liquids and condensate for ultimate sale which include costs related to processing, compressing, dehydrating and fractionating, among others.
working interest - an interest that gives the owner the right to drill, produce and conduct operating activities on a property and receive a share of any production.
wet gas - natural gas that contains significant heavy hydrocarbons, such as propane, butane and other liquid hydrocarbons.




PART I : FINANCIAL INFORMATION
 
ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)Three Months Ended
(Unaudited) March 31,
Revenue and Other Operating Income:20202019
Natural Gas, NGL and Oil Revenue$251,494  $435,946  
Gain (Loss) on Commodity Derivative Instruments115,142  (195,376) 
Purchased Gas Revenue26,359  16,221  
Midstream Revenue18,406  18,443  
Other Operating Income4,958  3,197  
Total Revenue and Other Operating Income416,359  278,431  
Costs and Expenses:
Operating Expense
Lease Operating Expense10,033  18,627  
Transportation, Gathering and Compression83,242  79,409  
Production, Ad Valorem, and Other Fees6,162  6,946  
Depreciation, Depletion and Amortization129,164  125,161  
Exploration and Production Related Other Costs3,888  3,258  
Purchased Gas Costs24,998  16,214  
Impairment of Exploration and Production Properties61,849  —  
Impairment of Goodwill473,045  —  
Selling, General, and Administrative Costs30,238  35,738  
Other Operating Expense20,681  23,474  
Total Operating Expense843,300  308,827  
Other Expense (Income)
Other Expense (Income)5,186  (579) 
(Gain) Loss on Asset Sales and Abandonments(12,055) 3,085  
(Gain) Loss on Debt Extinguishment(11,263) 7,537  
Interest Expense48,995  35,771  
Total Other Expense30,863  45,814  
Total Costs and Expenses874,163  354,641  
Loss Before Income Tax(457,804) (76,210) 
Income Tax Benefit(152,582) (11,559) 
Net Loss(305,222) (64,651) 
Less: Net Income Attributable to Noncontrolling Interest23,864  22,686  
Net Loss Attributable to CNX Resources Shareholders$(329,086) $(87,337) 
Loss per Share
Basic$(1.76) $(0.44) 
Diluted$(1.76) $(0.44) 
Dividends Declared$—  $—  
(Dollars in thousands, except per share data)Three Months Ended Nine Months Ended
(Unaudited)September 30, September 30,
Revenues and Other Operating Income:2019 2018 2019 2018
Natural Gas, NGLs and Oil Revenue$265,051
 $344,712
 $1,043,862
 $1,084,851
Gain on Commodity Derivative Instruments213,913
 18,005
 240,118
 78,752
Purchased Gas Revenue29,192
 10,560
 64,181
 38,546
Midstream Revenue18,525
 19,946
 55,863
 69,684
Other Operating Income3,316
 3,903
 9,436
 23,146
Total Revenue and Other Operating Income529,997
 397,126
 1,413,460
 1,294,979
Costs and Expenses:       
Operating Expense       
Lease Operating Expense14,202
 16,202
 52,706
 78,350
Transportation, Gathering and Compression80,193
 68,907
 244,217
 230,935
Production, Ad Valorem, and Other Fees6,127
 7,342
 20,103
 24,277
Depreciation, Depletion and Amortization120,459
 119,585
 374,619
 363,338
Exploration and Production Related Other Costs6,075
 3,321
 14,900
 9,401
Purchased Gas Costs27,490
 10,602
 62,476
 37,404
Impairment of Other Intangible Assets—
 —
 —
 18,650
Selling, General, and Administrative Costs24,307
 32,435
 109,016
 98,693
Other Operating Expense19,746
 17,405
 61,197
 51,238
Total Operating Expense298,599
 275,799
 939,234
 912,286
Other Expense (Income)       
Other Expense (Income)3,439
 1,105
 2,757
 (4,812)
Gain on Asset Sales and Abandonments(3,308) (134,320) (610) (148,942)
Gain on Previously Held Equity Interest—
 —
 —
 (623,663)
Loss on Debt Extinguishment—
 15,385
 7,614
 54,433
Interest Expense38,405
 35,723
 114,328
 112,712
Total Other Expense (Income)38,536
 (82,107) 124,089
 (610,272)
Total Costs and Expenses337,135
 193,692
 1,063,323
 302,014
Earnings Before Income Tax192,862
 203,434
 350,137
 992,965
Income Tax Expense48,902
 56,678
 78,133
 239,269
Net Income143,960
 146,756
 272,004
 753,696
Less: Net Income Attributable to Noncontrolling Interest28,422
 21,727
 81,325
 59,090
Net Income Attributable to CNX Resources Shareholders$115,538
 $125,029
 $190,679
 $694,606
        
Earnings per Share       
Basic$0.62
 $0.59
 $1.01
 $3.22
Diluted$0.61
 $0.59
 $1.01
 $3.18
        
Dividends Declared$—
 $—
 $—
 $—





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


4



CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Three Months Ended
(Dollars in thousands)March 31,
(Unaudited)20202019
Net Loss$(305,222) $(64,651) 
Other Comprehensive Income:
  Actuarially Determined Long-Term Liability Adjustments (Net of tax: ($40), ($15))112  44  
Comprehensive Loss(305,110) (64,607) 
Less: Comprehensive Income Attributable to Noncontrolling Interest23,864  22,686  
Comprehensive Loss Attributable to CNX Resources Shareholders$(328,974) $(87,293) 
 Three Months Ended Nine Months Ended
(Dollars in thousands)September 30, September 30,
(Unaudited)2019 2018 2019 2018
Net Income$143,960
 $146,756
 $272,004
 $753,696
Other Comprehensive Income:       
  Actuarially Determined Long-Term Liability Adjustments (Net of tax: ($15), ($13), ($44), ($794))41
 22
 126
 2,004


 
    
Comprehensive Income144,001
 146,778
 272,130
 755,700
        
Less: Comprehensive Income Attributable to Noncontrolling Interest28,422
 21,727
 81,325
 59,090
        
Comprehensive Income Attributable to CNX Resources Shareholders$115,579
 $125,051
 $190,805
 $696,610






































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


5


CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)  (Unaudited)
(Dollars in thousands)September 30,
2019		 December 31,
2018		(Dollars in thousands)March 31,
2020		December 31,
2019
ASSETS   ASSETS
Current Assets:   Current Assets:
Cash and Cash Equivalents$5,484
 $17,198
Cash and Cash Equivalents$31,833  $16,283  
Restricted CashRestricted Cash853  —  
Accounts and Notes Receivable:  
Accounts and Notes Receivable:
Trade96,997
 252,424
Other Receivables11,462
 11,077
Trade, netTrade, net91,477  133,480  
Other Receivables, netOther Receivables, net10,839  13,679  
Supplies Inventories7,527
 9,715
Supplies Inventories10,266  6,984  
Recoverable Income Taxes11,184
 149,481
Recoverable Income Taxes115,261  62,425  
Derivative InstrumentsDerivative Instruments312,749  247,794  
Prepaid Expenses213,072
 61,791
Prepaid Expenses12,775  17,456  
Total Current Assets345,726
 501,686
Total Current Assets586,053  498,101  
Property, Plant and Equipment:   Property, Plant and Equipment:
Property, Plant and Equipment10,512,298
 9,567,428
Property, Plant and Equipment10,691,516  10,572,006  
Less—Accumulated Depreciation, Depletion and Amortization2,981,723
 2,624,984
Less—Accumulated Depreciation, Depletion and Amortization3,622,413  3,435,431  
Total Property, Plant and Equipment—Net7,530,575
 6,942,444
Total Property, Plant and Equipment—Net7,069,103  7,136,575  
Other Assets:   Other Assets:
Operating Lease Right-of-Use Assets205,647
 —
Operating Lease Right-of-Use Assets159,521  187,097  
Investment in Affiliates17,110
 18,663
Investment in Affiliates16,549  16,710  
Derivative InstrumentsDerivative Instruments258,111  314,096  
Goodwill796,359
 796,359
Goodwill323,314  796,359  
Other Intangible Assets98,285
 103,200
Other Intangible Assets95,009  96,647  
Restricted CashRestricted Cash5,340  —  
Other292,556
 229,818
Other15,950  15,221  
Total Other Assets1,409,957
 1,148,040
Total Other Assets873,794  1,426,130  
TOTAL ASSETS$9,286,258
 $8,592,170
TOTAL ASSETS$8,528,950  $9,060,806  























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


6


CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Unaudited)
(Dollars in thousands, except per share data)March 31,
2020		December 31,
2019
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable$171,890  $202,553  
Derivative Instruments49,058  41,466  
Current Portion of Finance Lease Obligations7,200  7,164  
Current Portion of Long-Term Debt20,451  —  
Current Portion of Operating Lease Obligations54,622  61,670  
Other Accrued Liabilities197,130  216,086  
Total Current Liabilities500,351  528,939  
Non-Current Liabilities:
Long-Term Debt2,640,148  2,754,443  
Finance Lease Obligations6,095  7,706  
Operating Lease Obligations92,463  110,466  
Derivative Instruments163,898  115,862  
Deferred Income Taxes376,401  476,108  
Asset Retirement Obligations64,387  63,377  
Other40,497  41,596  
Total Non-Current Liabilities3,383,889  3,569,558  
TOTAL LIABILITIES3,884,240  4,098,497  
Stockholders’ Equity:
Common Stock, $.01 Par Value; 500,000,000 Shares Authorized, 187,035,851 Issued and Outstanding at March 31, 2020; 186,642,962 Issued and Outstanding at December 31, 2019
1,874  1,870  
Capital in Excess of Par Value2,205,941  2,199,605  
Preferred Stock, 15,000,000 shares authorized, None issued and outstanding—  —  
Retained Earnings1,641,009  1,971,676  
Accumulated Other Comprehensive Loss(12,493) (12,605) 
Total CNX Resources Stockholders’ Equity3,836,331  4,160,546  
Noncontrolling Interest808,379  801,763  
TOTAL STOCKHOLDERS' EQUITY4,644,710  4,962,309  
TOTAL LIABILITIES AND EQUITY$8,528,950  $9,060,806  

 (Unaudited)  
(Dollars in thousands, except per share data)September 30,
2019		 December 31,
2018
LIABILITIES AND EQUITY   
Current Liabilities:   
Accounts Payable$308,003
 $229,806
Current Portion of Finance Lease Obligations7,203
 6,997
Current Portion of Operating Lease Obligations65,061
 —
Other Accrued Liabilities241,357
 286,172
Total Current Liabilities621,624
 522,975
Non-Current Liabilities:   
Long-Term Debt2,640,234
 2,378,205
Finance Lease Obligations9,400
 13,299
Deferred Income Taxes476,968
 398,682
Operating Lease Obligations122,514
 —
Asset Retirement Obligations33,123
 37,479
Other160,577
 159,787
Total Non-Current Liabilities3,442,816
 2,987,452
TOTAL LIABILITIES4,064,440
 3,510,427
Stockholders’ Equity:   
Common Stock, $.01 Par Value; 500,000,000 Shares Authorized, 186,586,751 Issued and Outstanding at September 30, 2019; 198,663,342 Issued and Outstanding at December 31, 20181,870
 1,990
Capital in Excess of Par Value2,197,783
 2,264,063
Preferred Stock, 15,000,000 shares authorized, None issued and outstanding—
 —
Retained Earnings2,243,104
 2,071,809
Accumulated Other Comprehensive Loss(7,778) (7,904)
Total CNX Resources Stockholders’ Equity4,434,979
 4,329,958
Noncontrolling Interest786,839
 751,785
TOTAL STOCKHOLDERS' EQUITY5,221,818
 5,081,743
TOTAL LIABILITIES AND EQUITY$9,286,258
 $8,592,170


















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


7


CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common
Stock		Capital in
Excess
of Par
Value		Retained
Earnings
(Deficit)		Accumulated
Other
Comprehensive
Income
(Loss)		Total
CNX Resources
Stockholders’
Equity		Non-
Controlling
Interest		Total
Equity
December 31, 2019$1,870  $2,199,605  $1,971,676  $(12,605) $4,160,546  $801,763  $4,962,309  
(Unaudited)
Net (Loss) Income—  —  (329,086) —  (329,086) 23,864  (305,222) 
Issuance of Common Stock4  —  —  —  4  —  4  
Shares Withheld for Taxes—  —  (1,581) —  (1,581) (309) (1,890) 
Amortization of Stock-Based Compensation Awards—  6,336  —  —  6,336  504  6,840  
Other Comprehensive Income—  —  —  112  112  —  112  
Distributions to CNXM Noncontrolling Interest Holders—  —  —  —  —  (17,443) (17,443) 
March 31, 2020$1,874  $2,205,941  $1,641,009  $(12,493) $3,836,331  $808,379  $4,644,710  
December 31, 2018$1,990  $2,264,063  $2,071,809  $(7,904) $4,329,958  $751,785  $5,081,743  
(Unaudited)
Net (Loss) Income—  —  (87,337) —  (87,337) 22,686  (64,651) 
Issuance of Common Stock5  94  —  —  99  —  99  
Purchase and Retirement of Common Stock(31) (24,937) (8,529) —  (33,497) —  (33,497) 
Shares Withheld for Taxes—  —  (4,045) —  (4,045) (664) (4,709) 
Amortization of Stock-Based Compensation Awards—  10,291  —  —  10,291  612  10,903  
Other Comprehensive Income—  —  —  44  44  —  44  
Distributions to CNXM Noncontrolling Interest Holders—  —  —  —  —  (15,123) (15,123) 
March 31, 2019$1,964  $2,249,511  $1,971,898  $(7,860) $4,215,513  $759,296  $4,974,809  
 Three Months Ended Nine Months Ended
(Unaudited)September 30, September 30,
Dollars in Thousands2019 2018 2019 2018
Total Stockholders’ Equity, Beginning Balance$5,099,995
 $5,038,923
 $5,081,743
 $3,899,899
        
Common Stock and Capital in Excess of Par Value:       
Beginning Balance2,205,848
 2,374,788
 2,266,053
 2,452,564
Issuance of Common Stock49
 126
 211
 1,689
Purchase and Retirement of Common Stock(7,697) (66,503) (101,687) (155,191)
Amortization of Stock-Based Compensation Awards1,453
 4,737
 35,076
 14,086
Ending Balance2,199,653
 2,313,148
 2,199,653
 2,313,148
        
Retained Earnings:       
Beginning Balance2,127,627
 1,940,507
 2,071,809
 1,455,811
Net Income115,538
 125,029
 190,679
 694,606
Purchase and Retirement of Common Stock—
 (61,512) (13,790) (141,543)
Shares Withheld for Taxes(61) (136) (5,594) (4,986)
Ending Balance2,243,104
 2,003,888
 2,243,104
 2,003,888
        
Accumulated Other Comprehensive Loss:       
Beginning Balance(7,819) (6,494) (7,904) (8,476)
Other Comprehensive Income41
 22
 126
 2,004
Ending Balance(7,778) (6,472) (7,778) (6,472)
        
Total CNX Resources Corporation Stockholders' Equity4,434,979
 4,310,564
 4,434,979
 4,310,564
        
Non-Controlling Interest:       
Beginning Balance774,339
 730,122
 751,785
 —
Net Income28,422
 21,727
 81,325
 59,090
Shares Withheld for Taxes—
 (1) (690) (348)
Amortization of Stock-Based Compensation Awards328
 506
 1,481
 1,775
Distributions to CNXM Noncontrolling Interest Holders(16,250) (14,099) (47,062) (40,839)
Acquisition of CNX Gathering, LLC—
 —
 —
 718,577
Ending Balance786,839
 738,255
 786,839
 738,255
        
Total Stockholders' Equity, Ending Balance$5,221,818
 $5,048,819
 $5,221,818
 $5,048,819






















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


8



CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)Nine Months Ended(Unaudited)Three Months Ended
Dollars in ThousandsSeptember 30,Dollars in ThousandsMarch 31,
Cash Flows from Operating Activities:2019 2018Cash Flows from Operating Activities:20202019
Net Income$272,004
 $753,696
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
 
Net LossNet Loss$(305,222) $(64,651) 
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:
Depreciation, Depletion and Amortization374,619
 363,338
Depreciation, Depletion and Amortization129,164  125,161  
Amortization of Deferred Financing Costs6,057
 6,640
Amortization of Deferred Financing Costs2,447  1,707  
Impairment of Other Intangible Assets—
 18,650
Impairment of Exploration and Production PropertiesImpairment of Exploration and Production Properties61,849  —  
Impairment of GoodwillImpairment of Goodwill473,045  —  
Stock-Based Compensation36,557
 15,861
Stock-Based Compensation6,840  10,903  
Gain on Asset Sales and Abandonments(610) (148,942)
Gain on Previously Held Equity Interest—
 (623,663)
Loss on Debt Extinguishment7,614
 54,433
Gain on Commodity Derivative Instruments(240,118) (78,752)
Net Cash Received in Settlement of Commodity Derivative Instruments26,331
 2,518
(Gain) Loss on Asset Sales and Abandonments(Gain) Loss on Asset Sales and Abandonments(12,055) 3,085  
(Gain) Loss on Debt Extinguishment(Gain) Loss on Debt Extinguishment(11,263) 7,537  
(Gain) Loss on Commodity Derivative Instruments(Gain) Loss on Commodity Derivative Instruments(115,142) 195,376  
Loss on Other Derivative InstrumentsLoss on Other Derivative Instruments10,639  —  
Net Cash Received (Paid) in Settlement of Commodity Derivative InstrumentsNet Cash Received (Paid) in Settlement of Commodity Derivative Instruments151,161  (41,382) 
Deferred Income Taxes78,133
 259,116
Deferred Income Taxes(99,746) (11,559) 
Equity in Earnings of Affiliates(1,703) (4,688)
Equity in Loss (Earnings) of AffiliatesEquity in Loss (Earnings) of Affiliates161  (503) 
Return on Equity Investment3,256
 —
Return on Equity Investment—  1,306  
Changes in Operating Assets:
 
Changes in Operating Assets:
Accounts and Notes Receivable154,715
 50,125
Accounts and Notes Receivable43,639  94,480  
Recoverable Income Taxes138,406
 (8,501)Recoverable Income Taxes(52,836) 35,888  
Supplies Inventories2,188
 1,016
Supplies Inventories(3,282) (6,927) 
Prepaid Expenses5,725
 (337)Prepaid Expenses4,710  3,961  
Changes in Other AssetsChanges in Other Assets692  (6) 
Changes in Operating Liabilities:
 
Changes in Operating Liabilities:
Accounts Payable55,280
 2,532
Accounts Payable2,322  (5,962) 
Accrued Interest2,359
 5,812
Accrued Interest(5,063) 2,180  
Other Operating Liabilities(31,689) 30,418
Other Operating Liabilities(13,626) (34,434) 
Changes in Other Liabilities(23,041) (9,736)Changes in Other Liabilities(1,047) (7,508) 
Other9
 683
Net Cash Provided by Operating Activities866,092
 690,219
Net Cash Provided by Operating Activities267,387  308,652  
Cash Flows from Investing Activities:
 
Cash Flows from Investing Activities:
Capital Expenditures(964,502) (794,124)Capital Expenditures(152,049) (299,138) 
CNX Gathering LLC Acquisition, Net of Cash Acquired—
 (299,272)
Proceeds from Asset Sales15,276
 500,811
Proceeds from Asset Sales13,975  5,806  
Net Distributions from Equity Affiliates—
 7,750
Net Cash Used in Investing Activities(949,226) (584,835)Net Cash Used in Investing Activities(138,074) (293,332) 
Cash Flows from Financing Activities:
 
Cash Flows from Financing Activities:
Payments on Miscellaneous Borrowings(5,322) (5,455)Payments on Miscellaneous Borrowings(1,792) (1,747) 
Payments on Long-Term Notes(405,876) (935,419)Payments on Long-Term Notes(59,880) (405,876) 
Net Proceeds from (Payments on) CNXM Revolving Credit Facility162,000
 (105,500)
Proceeds from CNX Revolving Credit Facility

1,200
 439,000
Net Proceeds from CNXM Revolving Credit FacilityNet Proceeds from CNXM Revolving Credit Facility35,250  52,650  
Payments on CNX Revolving Credit Facility
Payments on CNX Revolving Credit Facility
(224,000) (98,000) 
Proceeds from Issuance of CNX Senior Notes500,000
 —
Proceeds from Issuance of CNX Senior Notes—  500,000  
Proceeds from Issuance of CNXM Senior Notes—
 394,000
Net Proceeds from CSG Non-Revolving Credit FacilitiesNet Proceeds from CSG Non-Revolving Credit Facilities173,250  —  
Distributions to CNXM Noncontrolling Interest Holders(47,062) (40,839)Distributions to CNXM Noncontrolling Interest Holders(17,443) (15,123) 
Proceeds from Issuance of Common Stock210
 1,689
Proceeds from Issuance of Common Stock4  99  
Shares Withheld for Taxes(6,284) (5,335)Shares Withheld for Taxes(1,890) (4,709) 
Purchases of Common Stock(117,477) (294,365)Purchases of Common Stock—  (32,498) 
Debt Repurchase and Financing Fees(9,969) (19,655)
Net Cash Provided by (Used in) Financing Activities71,420
 (571,879)
Net Decrease in Cash and Cash Equivalents(11,714) (466,495)
Cash and Cash Equivalents at Beginning of Period17,198
 509,167
Cash and Cash Equivalents at End of Period$5,484
 $42,672
Debt Issuance and Financing FeesDebt Issuance and Financing Fees(11,069) (3,342) 
Net Cash Used in Financing ActivitiesNet Cash Used in Financing Activities(107,570) (8,546) 
Net Increase in Cash, Cash Equivalents and Restricted CashNet Increase in Cash, Cash Equivalents and Restricted Cash21,743  6,774  
Cash, Cash Equivalents, and Restricted Cash at Beginning of PeriodCash, Cash Equivalents, and Restricted Cash at Beginning of Period16,283  17,198  
Cash, Cash Equivalents, and Restricted Cash at End of PeriodCash, Cash Equivalents, and Restricted Cash at End of Period$38,026  $23,972  



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


9


CNX RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

NOTE 1—BASIS OF PRESENTATION:

The accompanying Unaudited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2019March 31, 2020 are not necessarily indicative of the results that may be expected for future periods.

The Consolidated Balance Sheet at December 31, 20182019 has been derived from the Audited Consolidated Financial Statements at that date but does not include all the notes required by generally accepted accounting principles for complete financial statements. For further information, refer to the Consolidated Financial Statements and related notes for the year ended December 31, 20182019 included in CNX Resources Corporation's ("CNX," "CNX Resources," the "Company," "we," "us," or "our") Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC) on February 7, 2019.10, 2020.

Certain amounts in prior periods have been reclassified to conform to the current period presentation.

Cash, Cash Equivalents, and Restricted Cash

The Consolidated Balance Sheet at September 30, 2019 reflectsfollowing table provides a reconciliation of cash, cash equivalents, and restricted cash to amounts shown in the full consolidationstatement of CNX Gathering LLC's assets and liabilities as a resultcash flows:
March 31,
20202019
Cash and Cash Equivalents$31,833  $23,972  
Restricted Cash, Current Portion853  —  
Restricted Cash, Less Current Portion5,340  —  
Total Cash, Cash Equivalents, and Restricted Cash$38,026  $23,972  

Restricted Cash

Consists of cash that the Company is contractually obligated to maintain in accordance with the terms of the acquisition by CNX Gas Company LLC ("CNX Gas"), an indirect wholly owned subsidiary of CNX, of NBL Midstream, LLC's ("Noble") 50% interest in CNXCardinal States Gathering LLC on January 3, 2018and CSG Holdings II LLC Credit Agreement dated March 13, 2020 (See Note 59 - Acquisitions and DispositionsLong-Term Debt for more information).

Receivables

On January 1, 2020, CNX adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. CNX adopted Topic 326 using the prospective transition method.

Prior to adopting Topic 326, CNX reserved for specific accounts receivable when it was probable that all or a part of an outstanding balance would not be collected, such as customer bankruptcies. Collectability was determined based on terms of sale, credit status of customers and various other circumstances. CNX regularly reviewed collectability and established or adjusted the allowance as necessary using the specific identification method. Account balances were charged off against the allowance after all means of collection had been exhausted and the potential for recovery was considered remote. Reserves for uncollectable amounts were not material in the periods presented.
Under Topic 326 management records an allowance for credit losses related to the collectability of third-party customers receivables using the historical aging of the customer receivable balance. The collectability is determined based on past events, including historical experience, customer credit rating, as well as current market conditions. CNX monitors customer ratings

10

and collectability on an on-going basis. Account balances will be charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The allowance for credit losses are as follows:
March 31,December 31,
20202019
Accounts Receivable - Trade$91,608  $133,480  
Allowance for Credit Losses(131) —  
Accounts Receivable - Trade, net$91,477  $133,480  
Other Receivables$15,868  $16,142  
Allowance for Credit Losses(5,029) (2,463) 
Other Receivables, net$10,839  $13,679  

NOTE 2—EARNINGS PER SHARE:

Basic earnings per share is computed by dividing net income attributable to CNX shareholders by the weighted average shares outstanding during the reporting period. Diluted earnings per share areis computed similarly to basic earnings per share, except that the weighted average shares outstanding are increased to include, if dilutive, additional shares from stock options, performance stock options, restricted stock units and performance share units, if dilutive.units. The number of additional shares is calculated by assuming that outstanding stock options and performance share options were exercised, that outstanding restricted stock units and performance share units were released, and that the proceeds from such activities were used to acquire shares of common stock at the average market price during the reporting period. CNX Midstream Partners LP's ("CNXM") dilutive units did not have a material impact on the Company's earnings per share calculations for the three or nine months ended September 30, 2019, the three months ended September 30, 2018,March 31, 2020 or the period from January 3, 2018 through September 30, 2018.March 31, 2019.

The table below sets forth the share-based awards that have been excluded from the computation of diluted earnings per share because their effect would be antidilutive:
 For the Three Months Ended March 31,
 20202019
Anti-Dilutive Options4,274,552  4,756,292  
Anti-Dilutive Restricted Stock Units2,007,960  1,708,610  
Anti-Dilutive Performance Share Units457,746  540,400  
Anti-Dilutive Performance Stock Options927,268  927,268  
7,667,526  7,932,570  
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2019 2018 2019 2018
Anti-dilutive Options2,035,273
 2,288,274
 2,035,273
 2,288,274
Anti-dilutive Restricted Stock Units814,183
 —
 813,266
 55,936
Anti-dilutive Performance Share Units—
 157,120
 —
 157,120
Anti-dilutive Performance Stock Options927,268
 927,268
 927,268
 927,268
 3,776,724
 3,372,662
 3,775,807
 3,428,598











10


The table below sets forth the share-based awards that have been exercised or released:
 For the Three Months Ended March 31,
 20202019
Options—  13,748  
Restricted Stock Units340,883  457,969  
Performance Share Units274,716  342,882  
615,599  814,599  
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2019 2018 2019 2018
Options6,953
 18,546
 27,794
 245,847
Restricted Stock Units28,769
 184,176
 1,002,003
 362,573
Performance Share Units—
 192,926
 342,882
 550,523
 35,722
 395,648
 1,372,679
 1,158,943


Pursuant to the terms of the change in control severance agreements of certain employees and CNX officers, outstanding equity awards held by such employees vest upon a stockholder (or stockholder group) becoming the beneficial owner of more than 25% of the Company's outstanding common stock. During the nine months ended September 30, 2019, Southeastern Asset Management, Inc. and its affiliates ("SEAM") acquired shares of CNX's common stock in the open market which resulted in SEAM's aggregate share ownership exceeding more than 25% of CNX's common stock outstanding. This transaction, as such, constituted a change in control event under the severance agreements, resulting in the accelerated vesting of 473,126 restricted stock units and 903,100 performance share units held by the aforementioned employees that were issued prior to 2019. Those affected employees and officers each consented to waive the change in control vesting provision included in the change in control severance agreements with respect to their 2019 restricted stock unit and performance share unit awards. The accelerated vesting resulted in $19,654 of additional long-term equity-based compensation expense for the nine months ended September 30, 2019, and is included in Selling, General, and Administrative Costs in the Consolidated Statements of Income. The performance share unit awards that vested continue to be subject to the attainment of performance goals as determined by the Compensation Committee of CNX's Board of Directors after the end of the applicable performance period.








11

The computations for basic and diluted earningsloss per share are as follows:
For the Three Months Ended March 31,
 20202019
Net Loss$(305,222) $(64,651) 
      Less: Net Income Attributable to Non-Controlling Interest23,864  22,686  
Net Loss Attributable to CNX Resources Shareholders$(329,086) $(87,337) 
Weighted-Average Shares of Common Stock Outstanding186,918,361  197,475,702  
Effect of Diluted Shares*—  —  
Weighted-Average Diluted Shares of Common Stock Outstanding186,918,361  197,475,702  
Loss per Share:
Basic$(1.76) $(0.44) 
Diluted$(1.76) $(0.44) 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2019 2018 2019 2018
Net Income$143,960
 $146,756
 $272,004
 $753,696
      Less: Net Income Attributable to Non-Controlling Interest28,422
 21,727
 81,325
 59,090
Net Income Attributable to CNX Resources Shareholders$115,538
 $125,029
 $190,679
 $694,606
        
Weighted-average Shares of Common Stock Outstanding187,448,749
 210,238,509
 188,012,044
 216,010,561
Effect of Diluted Shares982,210
 2,469,573
 1,548,899
 2,288,301
Weighted-average Diluted Shares of Common Stock Outstanding188,430,959
 212,708,082
 189,560,943
 218,298,862
        
Earnings per Share:       
Basic$0.62
 $0.59
 $1.01
 $3.22
Diluted$0.61
 $0.59
 $1.01
 $3.18
*During periods in which the Company incurs a net loss, diluted weighted average shares outstanding are equal to basic weighted average shares outstanding because the effect of all equity awards is antidilutive.




11


NOTE 3—CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS:

Changes in Accumulated Other Comprehensive Loss related to pension obligations, net of tax, were as follows:
 Amount
Balance at December 31, 2018$(7,904)
Amounts Reclassified from Accumulated Other Comprehensive Loss, net of tax126
Balance at September 30, 2019$(7,778)


The following table shows the reclassification of adjustments out of Accumulated Other Comprehensive Loss:
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2019 2018 2019 2018
Actuarially Determined Long-Term Liability Adjustments       
Amortization of Prior Service Costs$(4) $(6) $(13) $(186)
Recognized Net Actuarial Loss60
 41
 183
 749
Total56
 35
 170
 563
Less: Tax Benefit15
 13
 44
 202
Net of Tax$41
 $22
 $126
 $361


NOTE 4—REVENUE FROM CONTRACTS WITH CUSTOMERS:

Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company has elected to exclude all taxes from the measurement of transaction price.

For natural gas, NGLsNGL and oil, and purchased gas revenue, the Company generally considers the delivery of each unit (MMBtu or Bbl) to be a separate performance obligation that is satisfied upon delivery. Payment terms for these contracts typically require payment within 25 days of the end of the calendar month in which the hydrocarbons are delivered. A significant number of these contracts contain variable consideration because the payment terms refer to market prices at future delivery dates. In these situations, the Company has not identified a standalone selling price because the terms of the variable payments relate specifically to the Company’s efforts to satisfy the performance obligations. A portion of the contracts contain fixed consideration (i.e. fixed price contracts or contracts with a fixed differential to NYMEX or index prices). The fixed consideration is allocated to each performance obligation on a relative standalone selling price basis, which requires judgment from management. For these contracts, the Company generally concludes that the fixed price or fixed differentials in the contracts are representative of the standalone selling price. Revenue associated with natural gas, NGLsNGL and oil as presented on the accompanying Consolidated Statements of Income represent the Company’s share of revenues net of royalties and excluding revenue interests owned by others. When selling natural gas, NGLsNGL and oil on behalf of royalty owners or working interest owners, the Company is acting as an agent and thus reports the revenue on a net basis.

Midstream revenue consists of revenues generated from natural gas gathering activities. The gas gathering services are interruptible in nature and include charges for the volume of gas actually gathered and do not guarantee access to the system. Volumetric based fees are based on actual volumes gathered. The Company generally considers the interruptible gathering of each unit (MMBtu) of natural gas as a separate performance obligation. Payment terms for these contracts typically require payment within 25 days of the end of the calendar month in which the hydrocarbons are gathered.














12


Disaggregation of Revenue

The following table is a disaggregation of revenue by major source:
For the Three Months Ended March 31,
20202019
Revenue from Contracts with Customers
Natural Gas Revenue$229,599  $403,687  
NGL Revenue19,412  29,766  
Condensate Revenue1,901  2,327  
Oil Revenue582  166  
Total Natural Gas, NGL and Oil Revenue251,494  435,946  
Purchased Gas Revenue26,359  16,221  
Midstream Revenue18,406  18,443  
Other Sources of Revenue and Other Operating Income
Gain (Loss) on Commodity Derivative Instruments115,142  (195,376) 
Other Operating Income4,958  3,197  
Total Revenue and Other Operating Income$416,359  $278,431  
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
2019 2018 2019 2018
Revenue from Contracts with Customers       
Natural Gas Revenue$245,815
 $293,864
 $966,574
 $930,505
NGLs Revenue18,305
 46,663
 72,095
 137,104
Condensate Revenue839
 3,426
 4,846
 14,925
Oil Revenue92
 759
 347
 2,317
Total Natural Gas, NGLs and Oil Revenue265,051
 344,712
 1,043,862
 1,084,851
        
Purchased Gas Revenue29,192
 10,560
 64,181
 38,546
Midstream Revenue18,525
 19,946
 55,863
 69,684
        
Other Sources of Revenue and Other Operating Income       
Gain on Commodity Derivative Instruments213,913
 18,005
 240,118
 78,752
Other Operating Income3,316
 3,903
 9,436

23,146
Total Revenue and Other Operating Income$529,997
 $397,126
 $1,413,460
 $1,294,979


The disaggregated revenue corresponds with the Company’s segment reporting found in Note 1714 - Segment Information.

Contract Balances

CNX invoices its customers once a performance obligation has been satisfied, at which point payment is unconditional. Accordingly, CNX's contracts with customers do not give rise to contract assets or liabilities under Accounting Standards Codification (ASC)ASC 606. The Company has no contract assets recognized from the costs to obtain or fulfill a contract with a customer. The opening and closing balances of the Company’s receivables related to contracts with customers were $252,424$133,480 and $96,997,$91,477, respectively, as of September 30, 2019.March 31, 2020.

Transaction Price Allocated to Remaining Performance Obligations

ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied. However, the guidance provides certain practical expedients that limit this requirement, including when variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a series.

A significant portion of CNX's natural gas, NGLsNGL and oil and purchased gas revenue is short-term in nature with a contract term of one year or less. For those contracts, CNX has utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

For revenue associated with contract terms greater than one year, a significant portion of the consideration in those contracts is variable in nature and the Company allocates the variable consideration in its contract entirely to each specific performance obligation to which it relates. Therefore, any remaining variable consideration in the transaction price is allocated entirely to wholly unsatisfied performance obligations. As such, the Company has not disclosed the value of unsatisfied performance obligations pursuant to the practical expedient.

For revenue associated with contract terms greater than one year with a fixed price component, the aggregate amount of the transaction price allocated to remaining performance obligations was $155,567$145,670 as of September 30, 2019.March 31, 2020. The Company expects to recognize net revenue of $43,538$41,981 in the next 12 months and $47,076$48,783 over the following 12 months, with the remainder recognized thereafter.

For revenue associated with ourCNX's midstream contracts, which also have terms greater than one year, the interruptible gathering of each unit of natural gas represents a separate performance obligation; therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required.



13



Prior-Period Performance Obligations

CNX records revenue in the month production is delivered to the purchaser. However, settlement statements for certain natural gas and NGL revenue may not be received for 30 to 90 days after the date production is delivered, and as a result, the Company is required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. CNX records the differences between the estimate and the actual amountamounts received in the month that payment is received from the purchaser. The Company has existing internal controls for its revenue estimation process and the related accruals, and any identified differences between its revenue estimates and the actual revenue received historically have not been significant. For the three and nine months ended September 30,March 31, 2020 and 2019, and 2018, revenue recognized in the current reporting period related to performance obligations satisfied in a prior reporting period was not material.

NOTE 5—ACQUISITIONS AND DISPOSITIONS:

On August 31, 2018, CNX closed on the sale of substantially all of its Ohio Utica Joint Venture Assets in the wet gas Utica Shale areas of Belmont, Guernsey, Harrison, and Noble Counties, which included approximately 26,000 net undeveloped acres. The net cash proceeds of $381,214 are included in Proceeds from Asset Sales in the Consolidated Statements of Cash Flows and the net gain on the transaction of $130,849 is included in the Gain on Asset Sales and Abandonments in the Consolidated Statements of Income.

OnMay 2, 2018, CNX closed on an Asset Exchange Agreement (the “AEA”) with HG Energy II Appalachia, LLC (“HG Energy”), pursuant to which, among other things, HG Energy (i) paid to CNX approximately $7,000 and (ii) assigned to CNX certain undeveloped Marcellus and Utica acreage in Southwest Pennsylvania, in exchange for CNX (x) assigning its interest in certain non-core midstream assets and surface acreage to HG Energy and (y) releasing certain HG Energy oil and gas acreage from dedication under a gathering agreement that is partially held, indirectly, by CNX.In connection with the transaction, CNX also agreed to certain transactions with CNXM, including the amendment of the existing gas gathering agreement between CNX and CNXM to increase the existing well commitment by an additional 40 wells. The net gain on the sale was $286 and is included in the Gain on Asset Sales and Abandonments line of the Consolidated Statements of Income.

As a result of the AEA, CNX determined that the carrying value of a portion of the customer relationship intangible assets that were acquired in connection with the Midstream Acquisition discussed below (see also Note 8 - Goodwill and Other Intangible Assets) exceeded their fair value, and recognized an impairment of approximately $18,650 which is included in the Impairment of Other Intangible Assets line of the Consolidated Statements of Income.
On March 30, 2018, CNX Gas completed the sale of substantially all of its shallow oil and gas assets and certain Coalbed Methane (CBM) assets in Pennsylvania and West Virginia for $89,296 in cash consideration. In connection with the sale, the buyer assumed approximately $196,514 of asset retirement obligations. The net gain on the sale was $4,432 and is included in Gain on Asset Sales and Abandonments in the Consolidated Statements of Income for the nine months ended September 30, 2018.

On December 14, 2017, CNX Gas entered into a purchase agreement with Noble, pursuant to which CNX Gas acquired Noble’s 50% membership interest in CONE Gathering LLC ("CNX Gathering"), for a cash purchase price of $305,000 and the mutual release of all outstanding claims (the "Midstream Acquisition"). CNX Gathering owns a 100% membership interest in CONE Midstream GP LLC (the "general partner"), which is the general partner of CONE Midstream Partners LP ("CNXM" or the "Partnership"), which is a publicly traded master limited partnership formed in May 2014 by CNX Gas and Noble. In conjunction with the Midstream Acquisition, which closed on January 3, 2018, the general partner, the Partnership and CONE Gathering LLC changed their names to CNX Midstream GP LLC, CNX Midstream Partners LP, and CNX Gathering LLC, respectively.

Prior to the Midstream Acquisition, the Company accounted for its 50% interest in CNX Gathering as an equity method investment as the Company had the ability to exercise significant influence, but not control, over the operating and financial policies of the midstream operations. In conjunction with the Midstream Acquisition, the Company obtained a controlling interest in CNX Gathering and, through CNX Gathering's ownership of the general partner, control over the Partnership. Accordingly, the Midstream Acquisition has been accounted for as a business combination using the acquisition method of accounting pursuant to ASC Topic 805, Business Combinations, or ASC 805. ASC 805 requires that, in circumstances where a business combination is achieved in stages (or step acquisition), previously held equity interests are remeasured at fair value and any difference between the fair value and the carrying value of the equity interest held be recognized as a gain or loss on the statement of income.

The fair value assigned to the previously held equity interest in CNX Gathering and CNXM for purposes of calculating the gain or loss was $799,033 and was determined using the income approach, based on a discounted cash flow methodology. The


14


resulting gain on remeasurement to fair value of the previously held equity interest in CNX Gathering and CNXM of $623,663 is included in Gain on Previously Held Equity Interest in the Consolidated Statements of Income.

The fair value of the previously held equity interests was based on inputs that are not observable in the market and therefore represent Level 3 inputs (See Note 15 - Fair Value of Financial Instruments). The fair value was measured using valuation techniques that convert future cash flows into a single discounted amount. Significant inputs to the valuation included estimates of: (i) gathering volumes; (ii) future operating costs; and (iii) a market-based weighted average cost of capital. These inputs required significant judgments and estimates by management.

The fair value of midstream facilities and equipment, generally consisting of pipeline systems and compression stations, were estimated using the cost approach. Significant unobservable inputs in the valuation include management's assumptions about the replacement costs for similar assets, the relative age of the acquired assets and any potential economic or functional obsolescence associated with the acquired assets. As a result, the fair value estimates of the midstream facilities and equipment represents a Level 3 fair value measurement.

As part of the purchase price allocation, the Company identified intangible assets for customer relationships with third-party customers. The fair value of the identified intangible assets was determined using the income approach, which requires a forecast of the expected future cash flows generated and an estimated market-based weighted average cost of capital. Significant unobservable inputs in the valuation include future revenue estimates, future cost assumptions, and estimated customer retention rates. As a result, the fair value estimate of the identified intangible assets represents a Level 3 fair value measurement.
The noncontrolling interest in the acquired business is comprised of the limited partner units in CNXM, which were not acquired by the Company. The CNXM limited partner units are actively traded on the New York Stock Exchange and were valued based on observable market prices as of the transaction date and therefore represent a Level 1 fair value measurement.

Allocation of Purchase Price (Midstream Acquisition)

The following table summarizes the purchase price and the amounts of identified assets acquired and liabilities assumed based on the fair value as of January 3, 2018, with any excess of the purchase price over the fair value of the identified net assets acquired recorded as goodwill. The purchase price allocation was finalized as of December 31, 2018.

Fair Value of Consideration Transferred:
 Amount
Cash Consideration$305,000
CNX Gathering Cash on Hand at January 3, 2018 Distributed to Noble2,620
Fair Value of Previously Held Equity Interest799,033
Total Estimated Fair Value of Consideration Transferred$1,106,653






















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The following is a summary of the fair values of the net assets acquired:
Fair Value of Assets Acquired:Amount
Cash and Cash Equivalents$8,348
Accounts and Notes Receivable21,199
Prepaid Expense2,006
Other Current Assets163
Property, Plant and Equipment, Net1,043,340
Intangible Assets128,781
Other593
Total Assets Acquired1,204,430
  
Fair Value of Liabilities Assumed: 
Accounts Payable26,059
CNXM Revolving Credit Facility149,500
Total Liabilities Assumed175,559
  
Total Identifiable Net Assets1,028,871
Fair Value of Noncontrolling Interest in CNXM(718,577)
Goodwill796,359
Net Assets Acquired$1,106,653


Post-Acquisition Operating Results (Midstream Acquisition)

The Midstream Acquisition contributed the following to the Company's Midstream segment:
 Three Months Ended Nine Months Ended
September 30, September 30,
 2019 2018 2019 2018
Midstream Revenue$74,261
 $61,372
 $225,280
 $186,875
Earnings Before Income Tax$41,741
 $31,173
 $118,739
 $94,502


NOTE 6—4—INCOME TAXES:

The effective tax rates for the three and nine months ended September 30,March 31, 2020 and 2019 were 25.4%33.3% and 22.3%15.2%, respectively. The effective tax rate for the ninethree months ended September 30, 2019March 31, 2020 differs from the U.S. federal statutory rate of 21% primarily due to the impact of noncontrolling interest, equity compensation and state income taxes.

The effective tax rates for the three and nine months ended September 30, 2018 were 27.9% and 24.1%, respectively. The effective rate for the nine months ended September 30, 2018 differs from the U.S. federal statutory rate of 21% primarily due to increases for both state income taxes and state valuation allowances, offset by the benefit derived from the filing of a Federal 10-year net operating loss (“NOL”) carryback as well as non-controlling interest.

On December 22, 2017,March 27, 2020, the United States enacted the Tax CutsCoronavirus Aid, Relief, and JobsEconomic Security Act (the "Act") which, among other things, loweredthings; removed the U.S. Federal corporate80% taxable income limitation for utilization of net operating losses generated in tax rateyears 2018 through 2020, allowing for 5-year net operating loss carrybacks, increased the adjusted taxable income limitation for the disallowance of interest expense from 35%30% to 21%, repealed the corporate alternative minimum tax ("AMT")50%, and provided for a refundrefunds of previously accrued corporate AMTany remaining alternative minimum tax (“AMT”) credits. As a result of December 31, 2018,the Act, the Company reclassifiedrecorded AMT refunds of $102,482 from Deferred Income Taxes toin Recoverable Income Taxes inon the Consolidated Balance Sheets in anticipation of the AMT refund that is also includedbeing received in 2020. The impact of other tax implications of the RecoverableAct on the financial statements and related disclosures are immaterial.

In December 2019, the FASB issued Accounting Standards Update (ASU) 2019-12 - Income Taxes line- Simplifying the Accounting for Income Taxes (Topic 740), which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This ASU removes the following exceptions: (1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items; (2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; (3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and (4) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments in this ASU also improve consistency and simplify other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU will be applied using different approaches depending on what the Consolidated Statementsspecific amendment relates to and, for public entities, are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company early adopted ASU 2019-12 as of Cash Flows in the nine months ended September 30, 2019.January 1, 2020.

The total amount of uncertain tax positions at each of September 30, 2019March 31, 2020 and December 31, 20182019 was $31,516. If these uncertain tax positions were recognized, approximately $31,516 would affect CNX's effective tax rate.rate at March 31, 2020 and December 31, 2019 . There were no changes in unrecognized tax benefits during the three and nine months ended September 30, 2019.March 31, 2020.



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CNX recognizes accrued interest and penalties related to uncertain tax positions in interest expense.expense and income tax expense, respectively. As of September 30, 2019March 31, 2020 and December 31, 2018,2019, CNX had 0 accrued liabilities for interest related to uncertain tax positions.
CNX recognizes penalties accrued related to uncertain tax positions in its income tax expense. As of September 30, 2019 and December 31, 2018, CNX had no accrued liabilities for tax penalties related to uncertain tax positions.
CNX and its subsidiaries file federal income tax returns with the United States and tax returns within various state jurisdictions. With few exceptions, the Company is no longer subject to United States federal, state, local, or non-U.S. income tax examinations by tax authorities for the years before 2016. The Company expects the Internal Revenue Service and the Joint Committee on Taxation to conclude its audit of tax years 2016 through 2017 in the second quarter ofduring 2020.










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NOTE 7—5—PROPERTY, PLANT AND EQUIPMENT:
March 31,
2020		December 31,
2019
Intangible Drilling Cost$4,764,284  $4,688,497  
Gas Gathering Equipment2,477,889  2,463,866  
Proved Gas Properties1,209,521  1,208,046  
Gas Wells and Related Equipment1,067,318  1,042,000  
Unproved Gas Properties756,151  755,590  
Surface Land and Other Equipment225,074  226,285  
Other191,279  187,722  
Total Property, Plant and Equipment10,691,516  10,572,006  
Less: Accumulated Depreciation, Depletion and Amortization3,622,413  3,435,431  
Total Property, Plant and Equipment - Net$7,069,103  $7,136,575  
 September 30,
2019		 December 31,
2018
Property, Plant and Equipment   
Intangible Drilling Cost$4,566,206
 $4,120,283
Gas Gathering Equipment2,399,883
 2,126,895
Proved Gas Properties1,157,361
 1,135,411
Gas Wells and Related Equipment1,047,139
 859,359
Unproved Gas Properties949,529
 927,667
Surface Land and Other Equipment233,812
 238,487
Other158,368
 159,326
Total Property, Plant and Equipment10,512,298
 9,567,428
Less: Accumulated Depreciation, Depletion and Amortization2,981,723
 2,624,984
Total Property, Plant and Equipment - Net$7,530,575
 $6,942,444


Impairment of Proved Property

CNX performs a quantitative impairment test whenever events or changes in circumstances indicate that an asset group's carrying amount may not be recoverable, over proved properties using the published NYMEX forward prices, timing, methods and other assumptions consistent with historical periods. When indicators of impairment are present, tests require that the Company first compare expected future undiscounted cash flows by asset group to their respective carrying values. If the carrying amount exceeds the estimated undiscounted future cash flows, a reduction of the carrying amount of the natural gas properties to their estimated fair values is required, which is determined based on discounted cash flow techniques using significant assumptions including projected revenues, future commodity prices, and a market-specific weighted average cost of capital which are affected by expectations about future market and economic conditions.

During the three months ended March 31, 2020, CNX recognized certain indicators of impairments specific to our Southwest Pennsylvania (SWPA) CBM asset group and determined that carrying value of that asset group was not recoverable. The fair value of the asset group was estimated by using level 3 inputs which consisted of discounting the estimated future cash flows using discount rates and other assumptions that market participants would use in their estimates of fair value. As a result, an impairment of $61,849 was recognized and is included in Impairment of Exploration and Production Properties in the Consolidated Statements of Income. The impairment was related to an economic decision to temporarily idle certain wells and the related processing facility during the quarter.

NOTE 8—6—GOODWILL AND OTHER INTANGIBLE ASSETS:

In connectionDecember 2017, CNX Gas entered into a purchase agreement with Noble Energy, pursuant to which CNX Gas acquired Noble’s 50% membership interest in CNX Gathering (then named "CONE Gathering LLC"), for a cash purchase price of $305,000 (the "Midstream Acquisition"). 

Prior to the Midstream Acquisition, the Company accounted for its 50% interest in CNX Gathering as an equity method investment as the Company had the ability to exercise significant influence, but not control, over the operating and financial policies of the midstream operations. In conjunction with the Midstream Acquisition, the Company obtained a controlling interest in CNX Gathering and control over the Partnership. Accordingly, the Midstream Acquisition was accounted for as a business combination using the acquisition method of accounting pursuant to ASC Topic 805, Business Combinations, or ASC 805. ASC 805 requires that, closedin circumstances where a business combination is achieved in stages (or step acquisition), previously held equity interests are remeasured at fair value. The fair value assigned to the previously held equity interest in CNX Gathering and CNXM was $799,033 and was determined using the income approach, based on a discounted cash flow methodology.

As part of the allocation of purchase price and in connection with the fair value of consideration transferred at closing on January 3, 2018, (See Note 5 - Acquisitions and Dispositions for more information), CNX recorded $796,359 of goodwill and $128,781 of other intangible assets which are comprised of customer relationships.





15


Impairment of Goodwill

All goodwill is attributed to the Midstream reportable segment. Goodwill is evaluated for impairment at least annually and whenever events or changes in circumstance indicate that the fair value of a reporting unit is less than its carrying amount. In connection with the evaluation of goodwill for impairment, CNX may first consider qualitative factors to assess whether there are indicators that it is more likely than not that the fair value of a reporting unit may not exceed its carrying amount. If after assessing such factors or circumstances, CNX determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then a quantitative assessment is not required. If CNX chooses to bypass the qualitative assessment, or if it chooses to perform a qualitative assessment but is unable to qualitatively conclude that no impairment has occurred, then CNX will perform a quantitative assessment If the estimated fair value of a reporting unit is less than its carrying value, an impairment charge is recognized for the excess of the reporting unit's carrying value over its fair value. The Company uses a combination of the income approach (generally a discounted cash flow method) and market approach (which may include the guideline public company method and/or the guideline transaction method) to estimate the fair value of a reporting unit.

During the first quarter of 2020, the Company identified indicators of impairment in the form of deteriorating macroeconomic conditions, and the decline in the observable market value of CNXM securities both in relation to the COVID-19 pandemic and the overall decline in the MLP market space. Management concluded that these factors presented indications that the fair value of the midstream reporting unit was more likely than not below the reporting unit’s carrying value. CNX bypassed the qualitative assessment and performed a quantitative test that utilized a combination of the income and market approaches as described above to estimate the fair value of the Midstream reporting unit. As a result of this assessment, CNX concluded that the carrying value exceeded its estimated fair value, and a corresponding impairment of $473,045 was recorded, which was included in Impairment of Goodwill in the accompanying Consolidated Statements of Income. Any additional adverse changes in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that could trigger future impairment charges relating to the Midstream reporting unit.

In estimating the fair value of the midstream reporting unit, the Company used the income approach’s discounted cash flow method, which applies significant inputs not observable in the public market (Level 3), including estimates and assumptions related to the use of an appropriate discount rate, future throughput volumes, operating costs and capital spending, discounted to present value using an industry rate adjusted for company-specific risk, which management feels reflects the overall level of inherent risk of the reporting unit. These assumptions are affected by expectations about future market, industry and economic conditions. Cash flow projections were derived from board approved budgeted amounts, a five-year operating forecast and an estimate of future cash flows. Subsequent cash flows were developed using growth or contraction rates that management believes are reasonably likely to occur. The Company used the market approach’s comparable company method. The comparable company method evaluates the value of a company using metrics of other businesses of similar size and industry.

The estimates of future cash flows and EBITDA are subjective in nature and are subject to impacts from business risks as described in “Item 1A. Risk Factors” in CNX's 2019 Annual Report on Form 10-K as filed with the SEC on February 10, 2020 ("2019 Form 10-K"). The fair value estimation process requires considerable judgment and determining the fair value is sensitive to changes in assumptions impacting management’s estimates of future financial results. Although CNX believes the estimates and assumptions used in estimating the fair value are reasonable and appropriate, different assumptions and estimates could materially impact the estimated fair value. Future results could differ from our current estimates and assumptions.

Changes in the carrying amount of goodwill consist of the following activity:

Amount
December 31, 2019$796,359 
Impairment473,045 
March 31, 2020$323,314 








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Other Intangible Assets

The carrying amount and accumulated amortization of other intangible assets consist of the following:
March 31,
2020		December 31,
2019
Other Intangible Assets
Gross Amortizable Asset - Customer Relationships$109,752  $109,752  
Less: Accumulated Amortization - Customer Relationships14,743  13,105  
Total Other Intangible Assets, net$95,009  $96,647  
 September 30,
2019		 December 31, 2018
Other Intangible Assets   
Gross Amortizable Asset - Customer Relationships$109,752
 $109,752
Less: Accumulated Amortization - Customer Relationships11,467
 6,552
Total Other Intangible Assets, net$98,285
 $103,200


During the second quarter of 2018, CNX determined that the carrying value of a portion of the customer relationship intangible assets exceeded their fair value as a result of an Asset Exchange Agreement with HG Energy. Accordingly, CNX recognized an impairment on this intangible asset of $18,650. There were 0 such impairments in the current period.

The customer relationship intangible asset is being amortized on a straight-line basis over approximately 17 years. Amortization expense related to other intangible assets was $1,638 for the three and nine months ended September 30, 2019 was $1,638March 31, 2020 and $4,915, respectively. Amortization expense related to other intangible assets was $1,638 and $5,293 for the three and nine months ended September 30, 2018, respectively.2019. The estimated annual amortization expense is expected to approximate $6,552 per year for each of the next five years.



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NOTE 9—7—REVOLVING CREDIT FACILITIES:
CNX Resources Corporation (CNX)
In April 2019, CNX amended its senior secured revolving credit facility ("Credit Facility") and extended its maturity to April 2024. The lenders' commitments remained unchanged at $2,100,000, with an accordion feature that allows the Company to increase the commitments to $3,000,000. The borrowing base was reaffirmed at $2,100,000, including a $650,000 letters of credit aggregate sub-limit. In addition, the Cumulative Credit Basket for dividends and distributions was replaced with a basket for dividends and distributions subject to a pro forma net leverage ratio of at least 3.00 to 1.00 and availability under the credit facility of at least 15% of the aggregate commitments. If the aggregate principal amount of the existing 5.875% Senior Notes due in April 2022 and certain other publicly traded debt securities outstanding 91 days prior to the earliest maturity of such debt (the "Springing Maturity Date") is greater than $500,000, then the Credit Facility will mature on the Springing Maturity Date. In October 2019,April 2020, as part of the semi-annual borrowing base redetermination, both the lenders' increased CNX'scommitments and borrowing base decreased to $2,300,000.$1,900,000.

Under the terms of the amended agreement, borrowings under the revolving credit facility will bear interest at CNX's option at either:
•the base rate, which is the highest of (i) the federal funds open rate plus 0.50%, (ii) PNC Bank, N.A.’s prime rate, or (iii) the one-month LIBOR rate plus 1.0%, in each case, plus a margin ranging from 0.25% to 1.25%; or
•the LIBOR rate, which is the LIBOR rate plus a margin ranging from 1.25% to 2.25%.

The CNX Credit Facility is secured by substantially all of the assets of CNX and certain of its subsidiaries (excluding the Excluded Subsidiaries, which includes Cardinal States Gathering LLC, CNX Midstream GP LLC and itsCNXM and their respective subsidiaries). Fees and interest rate spreads are based on the percentage of facility utilization, measured quarterly. Availability under the Credit Facility is limited to a borrowing base, which is determined by the lenders' syndication agent and approved by the required number of lenders in good faith by calculating a value of CNX's proved natural gas reserves.

The CNX Credit Facility contains a number of affirmative and negative covenants including those that, except in certain circumstances, limit the Company and the subsidiary guarantors' ability to create, incur, assume or suffer to exist indebtedness, create or permit to exist liens on properties, dispose of assets, make investments, purchase or redeem CNX common stock, pay dividends, merge with another corporation and amend the senior unsecured notes. The Company must also mortgage 80% of the value of its proved reserves and 80% of the value of its proved developed producing reserves, in each case, which are included in the borrowing base, maintain applicable deposit, securities and commodities accounts with the lenders or affiliates thereof, and enter into control agreements with respect to such applicable accounts.

The CNX Credit Facility contains customary events of default, including, but not limited to, a cross-default to certain other debt, breaches of representations and warranties, change of control events and breaches of covenants.

The CNX Credit Facility also requires that CNX maintain a maximum net leverage ratio of no greater than 4.00 to 1.00, which is calculated as the ratio of debt less cash on hand to consolidated EBITDA, measured quarterly. CNX must also maintain a minimum current ratio of no less than 1.00 to 1.00, which is calculated as the ratio of current assets, plus revolver availability, to current liabilities, excluding borrowings under the revolver, measured quarterly. The calculation of all of the ratios exclude CNXM. CNX was in compliance with all financial covenants as of September 30, 2019.March 31, 2020.

17


At September 30,March 31, 2020, the CNX Credit Facility had $437,000 of borrowings outstanding and $204,839 of letters of credit outstanding, leaving $1,458,161 of unused capacity. At December 31, 2019, the CNX Credit Facility had $613,200$661,000 of borrowings outstanding and $199,066$204,726 of letters of credit outstanding, leaving $1,287,734 of unused capacity. At December 31, 2018, the CNX Credit Facility had $612,000 of borrowings outstanding and $198,396 of letters of credit outstanding, leaving $1,289,604$1,234,274 of unused capacity.

CNX Midstream Partners LP (CNXM)
In April 2019, CNXM amended its senior secured revolving credit facility and extended its maturity to April 2024. The lenders’ commitments remained unchanged at $600,000, with an accordion feature that allows CNXM to increase the available borrowings by up to an additional $250,000 under certain terms and conditions. Among other things, the revolving credit facility now includes (i) the addition of a restricted payment basket permitting cash repurchases of Incentive Distribution Rights (IDRs) subject to a pro forma secured leverage ratio of 3.00 to 1.00, a pro forma total leverage ratio of 4.00 to 1.00 and pro forma availability of 20% of commitments and (ii) a restricted payment basket for the repurchase of LP units not to exceed Available Cash (as defined in the partnership agreement) in any quarter, of up to $150,000 per year and up to $200,000 during the life of the facility.




18



Under the terms of the amended agreement, borrowings under the revolving credit facility will bear interest at CNXM's option at either:
•the base rate, which is the highest of (i) the federal funds open rate plus 0.50%, (ii) PNC Bank, N.A.’s prime rate, or (iii) the one-month LIBOR rate plus 1.0%, in each case, plus a margin ranging from 0.50% to 1.50%; or
•the LIBOR rate, plus a margin ranging from 1.50% to 2.50%.
Fees and interest rate spreads under the CNXM credit facility are based on the total leverage ratio, measured quarterly. The CNXM credit facility includes the ability to issue letters of credit up to $100,000 in the aggregate.

The CNXM revolving credit facility contains a number of affirmative and negative covenants that include, among others, covenants that, except in certain circumstances, restrict the ability of CNXM, its subsidiary guarantors and certain of its non-guarantor, non-wholly-owned subsidiaries, except in certain circumstances, to: (i) create, incur, assume or suffer to exist indebtedness; (ii) create or permit to exist liens on their properties; (iii) prepay certain indebtedness unless there is no default or event of default under the revolving facility; (iv) make or pay any dividends or distributions in excess of certain amounts; (v) merge with or into another person, liquidate or dissolve; or acquire all or substantially all of the assets of any going concern or going line of business or acquire all or a substantial portion of another person’s assets; (vi) make particular investments and loans; (vii) sell, transfer, convey, assign or dispose of its assets or properties other than in the ordinary course of business and other select instances; (viii) deal with any affiliate except in the ordinary course of business on terms no less favorable to CNXM than it would otherwise receive in an arm’s length transaction; and (ix) amend in any material manner its certificate of incorporation, bylaws, or other organizational documents without giving prior notice to the lenders and, in some cases, obtaining the consent of the lenders.

In addition, CNXM is obligated to maintain at the end of each fiscal quarter (w) for so long as at least $150,000 of the CNXM senior notes are outstanding, a maximum total leverage ratio of no greater than 5.25 to 1.00 (which increases to no greater than 5.50 to 1.00 during qualifying acquisition periods); (x) if less than $150,000 of the CNXM senior notes are outstanding, a maximum total leverage ratio of no greater than 4.75 to 1.00 (which increases to no greater than 5.25 to 1.00 during qualifying acquisition periods); (y) a maximum secured leverage ratio of no greater than 3.50 to 1.00 and (z) a minimum interest coverage ratio of no less than 2.50 to 1.00. CNXM was in compliance with all financial covenants as of September 30, 2019.March 31, 2020.

The CNXM revolving credit facility also contains customary events of default, including, but not limited to, a cross-default to certain other debt, breaches of representations and warranties, change of control events and breaches of covenants. The obligations under the revolving credit facility are secured by substantially all of the assets of CNXM and its wholly-owned subsidiaries. CNX is not a guarantor under the revolving credit facility.

At September 30, 2019,March 31, 2020, the CNXM credit facility had $246,000$347,000 of borrowings outstanding. CNXM had the maximum amount of revolving credit available for borrowing at September 30, 2019,March 31, 2020, or $354,000.$253,000. At December 31, 2018,2019, the CNXM credit facility had $84,000$311,750 of borrowings outstanding. CNXM had the maximum amount of revolving credit available for borrowing at December 31, 2019, or $288,250.





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NOTE 10—8—OTHER ACCRUED LIABILITIES:
March 31,
2020		December 31,
2019
Royalties$70,803  $74,061  
Accrued Interest25,800  30,862  
Transportation Charges22,355  16,533  
Deferred Revenue12,123  13,964  
Accrued Other Taxes9,385  9,115  
Accrued Payroll & Benefits6,209  6,248  
Short-Term Incentive Compensation2,626  21,030  
Other41,145  37,610  
Current Portion of Long-Term Liabilities:
Asset Retirement Obligations5,076  5,076  
Salary Retirement1,608  1,587  
Total Other Accrued Liabilities$197,130  $216,086  
  September 30,
2019		 December 31,
2018
Royalties $64,245
 $92,005
Gas Derivatives 44,826
 61,661
Accrued Interest 28,692
 26,333
Transportation Charges 19,925
 19,661
Deferred Revenue 11,614
 17,693
Short-Term Incentive Compensation 9,774
 20,482
Accrued Other Taxes 8,788
 7,300
Accrued Payroll & Benefits 5,909
 6,533
Other 40,862
 31,851
Current Portion of Long-Term Liabilities:    
Asset Retirement Obligations 5,076
 1,075
Salary Retirement 1,646
 1,578
Total Other Accrued Liabilities $241,357
 $286,172



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NOTE 11—9—LONG-TERM DEBT:
March 31,
2020		December 31,
2019
Senior Notes due April 2022 at 5.875% (Principal of $822,973 and $894,307
plus Unamortized Premium of $822 and $1,001, respectively)		$823,795  $895,308  
Senior Notes due March 2027 at 7.25%, Issued at Par Value500,000  500,000  
CNX Revolving Credit Facility437,000  661,000  
CNX Midstream Partners LP Senior Notes due March 2026 at 6.50% (Principal of $400,000 less Unamortized Discount of $4,438 and $4,625, respectively)*395,562  395,375  
CNX Midstream Partners LP Revolving Credit Facility*347,000  311,750  
Cardinal States Gathering Company Credit Facility maturing in March 2028 (Principal of $125,000 less Unamortized Discount of $1,243)123,757  —  
CSG Holdings II LLC Credit Facility maturing in December 2026 (Principal of $50,000 less Unamortized Discount of $497)49,503  —  
Less: Unamortized Debt Issuance Costs16,018  8,990  
2,660,599  2,754,443  
Less: Amounts Due in One Year20,451  —  
Long-Term Debt$2,640,148  $2,754,443  
 September 30,
2019		 December 31,
2018
Senior Notes due April 2022 at 5.875% (Principal of $894,307 and $1,294,307
plus Unamortized Premium of $1,108 and $2,069, respectively)		$895,415
 $1,296,376
CNX Credit Facility613,200
 612,000
Senior Notes due March 2027 at 7.25%, Issued at Par Value500,000
 —
CNX Midstream Partners LP Senior Notes due March 2026 at 6.50% (Principal of $400,000 less Unamortized Discount of $4,813 and $5,375, respectively)395,187
 394,625
CNX Midstream Partners LP Revolving Credit Facility246,000
 84,000
Less: Unamortized Debt Issuance Costs9,568
 8,796
Long-Term Debt$2,640,234
 $2,378,205
*CNX is not a guarantor of CNXM's 6.50% senior notes due in March 2026 or CNXM's senior secured revolving credit facility.


During the ninethree months ended September 30,March 31, 2020, CNX's wholly-owned subsidiary Cardinal States Gathering Company LLC (Cardinal States) entered into a $125,000 non-revolving credit facility agreement (the Cardinal States Facility). The Cardinal States Facility matures in 2028, has an interest rate of 3-month LIBOR + 450 basis points and includes an excess cash flow sweep in an amount required to achieve a quarterly targeted debt balance. The facility is secured by substantially all of the Cardinal States assets, requires a minimum level of hedging of the variable interest rate exposure and is non-recourse to CNX.

Additionally, during the three months ended March 31, 2020, CNX's wholly-owned subsidiary CSG Holdings II LLC (CSG Holdings) entered into a $50,000 non-revolving credit facility agreement (the CSG Holdings Facility). The CSG Holdings Facility matures in 2026, has interest rate of 3-month LIBOR + 675 basis points and includes a full excess cash sweep. The facility is secured by substantially all of the CSG Holding assets, requires a minimum level of hedging of the variable interest rate exposure and is non-recourse to CNX.

During the three months ended March 31, 2020, CNX purchased and retired $71,334 of its outstanding 5.875% senior notes due in April 2022. As part of this transaction, a gain of $11,263 was included in (Gain) Loss on Debt Extinguishment in the Consolidated Statements of Income.

During the three months ended March 31, 2019, CNX completed a private offering of $500,000 of 7.25% senior notes due

19

in March 2027. The notes are guaranteed by most of CNX's subsidiaries but do not include CNXM's general partner or CNXM.

During the ninethree months ended September 30,March 31, 2019, CNX purchased $400,000 of its outstanding 5.875% senior notes due in April 2022. As part of this transaction, a loss of $7,614$7,537 was included in (Gain) Loss on Debt Extinguishment in the Consolidated Statements of Income.

During the nine months ended September 30, 2018, CNXM completed a private offering of $400,000 of 6.50% senior notes due in March 2026 less $6,000 of unamortized bond discount. CNX is not a guarantor of CNXM's 6.50% senior notes due in March 2026 or CNXM's senior secured revolving credit facility.

During the nine months ended September 30, 2018, CNX purchased $391,375 of its outstanding 5.875% senior notes due in April 2022. As part of this transaction, a loss of $15,635 was included in Loss on Debt Extinguishment in the Consolidated Statements of Income.

During the three and nine months ended September 30, 2018, CNX purchased $200,000 and $500,000, respectively, of its outstanding 8.00% senior notes due in April 2023. As part of these transactions, a loss of $15,385 and $38,798, respectively, was included in Loss on Debt Extinguishment in the Consolidated Statements of Income.

NOTE 12—LEASES:

On January 1, 2019, the Company adopted Accounting Standard Update (ASU) 2016-02, and all related amendments, using the transition method, which allows for a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. CNX elected the transition relief package of practical expedients by applying previous accounting conclusions under ASC 840 to all leases that existed prior to the transition date. As a result, CNX did not reassess 1) whether existing or expired contracts contain leases, 2) lease classification for any existing or expired leases or 3) whether lease origination costs qualified as initial direct costs. Additionally, the Company elected the short-term practical expedient for all asset classes by establishing an accounting policy to exclude leases with a term of 12 months or less. CNX will not separate lease components from non-lease components for any asset class. Lastly, CNX adopted the easement practical expedient, which allows the Company to apply ASC 842 prospectively to land easements after the adoption date. Easements that existed or expired prior to the adoption date that were not previously assessed under ASC 840 will not be reassessed.

CNX's leasing activities primarily consist of operating and finance leases for electric fracturing equipment, natural gas drilling rigs, CNX's corporate headquarters as well as field offices, a natural gas gathering pipeline and commercial vehicles. Some leases include options to renew ranging from a period of 1 to 10 years, which are not recognized as part of the lease right-of-use (ROU) assets or liabilities as they are not reasonably certain to be exercised.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of the lease payments over the lease term. As most of CNX's leases do not provide an implicit rate, an incremental borrowing rate is used to determine the present value of lease payments.





20



The components of lease cost were as follows:
 For the Three Months Ended For the Nine Months Ended
 September 30, 2019 September 30, 2019
Operating Lease Cost$21,723
 $53,080
Finance Lease Cost:   
Amortization of Right-of-Use Assets1,310
 3,936
Interest on Lease Liabilities298
 974
Short-term Lease Cost555
 4,922
Variable Lease Cost*5,015
 16,554
Total Lease Cost$28,901
 $79,466
*Amounts recognized on the balance sheet for natural gas drilling rigs are measured using the rates that would be paid if the rigs were idle, as this represents the minimum payment that could be made under the contract. Variable lease cost represents amounts paid for natural gas drilling rigs above this minimum when the rigs are in use. Amounts recognized on the balance sheet for electric fracturing equipment are measured using minimum pumping hours under the contract; however, pumping hours may exceed the minimum and vary period to period. Any such amounts paid related to pumping hours in excess of the minimum represent variable lease cost.

Amounts recognized in the Consolidated Balance Sheet are as follows:
 September 30,
 2019
Operating Leases: 
Operating Lease Right-of-Use Asset$205,647
  
Current Portion of Operating Lease Obligations65,061
Operating Lease Obligations122,514
Total Operating Lease Liabilities$187,575
  
Finance Leases: 
Property, Plant and Equipment$73,363
Less—Accumulated Depreciation, Depletion and Amortization62,191
Property, Plant and Equipment—Net$11,172
  
Current Portion of Finance Lease Obligations$7,203
Finance Lease Obligations9,400
Total Finance Lease Liabilities$16,603

Supplemental cash flow information related to leases was as follows:
 For the Nine Months Ended
 September 30, 2019
Cash Paid for Amounts Included in the Measurement of Lease Liabilities: 
Operating Cash Flows from Operating Leases$48,308
Operating Cash Flows from Finance Leases$974
Financing Cash Flows from Finance Leases$5,322
Right-of-Use Assets Obtained in Exchange for Lease Obligations: 
Operating Leases$15,347
Finance Leases$1,722





21



Maturities of lease liabilities are as follows:
 Operating Finance
 Leases Leases
Twelve months ended September 30,   
2020$72,775
 $8,136
202157,943
 7,794
202237,534
 1,584
20235,460
 413
20245,440
 201
Thereafter32,034
 —
Total Lease Payments211,186
 18,128
Less: Interest23,611
 1,525
Present Value of Lease Liabilities$187,575
 $16,603


Lease terms and discount rates are as follows:
September 30,
2019
Weighted Average Remaining Lease Term (years):
Operating Leases4.46
Finance Leases2.35
Weighted Average Discount Rate:
Operating Leases4.95%
Finance Leases6.96%


NOTE 13—10—COMMITMENTS AND CONTINGENT LIABILITIES:
CNX and its subsidiaries are subject to various lawsuits and claims with respect to such matters as personal injury, royalty accounting, damage to property, climate change, governmental regulations including environmental violations and remediation, employment and contract disputes and other claims and actions arising out of the normal course of business. CNX accrues the estimated loss for these lawsuits and claims when the loss is probable and can be estimated. The Company's 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 CNX. 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 CNX; however, such amounts cannot be reasonably estimated.
At September 30, 2019,March 31, 2020, CNX has provided the following financial guarantees, unconditional purchase obligations, and letters of credit to certain third-parties as described by major category in the following tables. These amounts represent the maximum potential of total future payments that the Company could be required to make under these instruments. 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 unconditional purchase obligations and letters of credit are recorded as liabilities in the financial statements. CNX management believes that the commitments in the following table will expire without being funded, and therefore will not have a material adverse effect on financial condition.

 Amount of Commitment Expiration Per Period
 Total
Amounts
Committed		Less Than
1  Year		1-3 Years3-5 YearsBeyond
5  Years
Letters of Credit:
Firm Transportation$197,889  $196,917  $972  $—  $—  
Other6,950  6,950  —  —  —  
Total Letters of Credit204,839  203,867  972  —  —  
Surety Bonds:
Employee-Related2,600  2,600  —  —  —  
Environmental12,480  10,605  1,875  —  —  
Financial Guarantees81,670  81,670  —  —  —  
Other9,322  8,129  1,193  —  —  
Total Surety Bonds106,072  103,004  3,068  —  —  
Total Commitments$310,911  $306,871  $4,040  $—  $—  

22


 Amount of Commitment Expiration Per Period
 
Total
Amounts
Committed
 
Less Than
1  Year
 1-3 Years 3-5 Years 
Beyond
5  Years
Letters of Credit:         
Firm Transportation$198,316
 $80,244
 $118,072
 $—
 $—
Other750
 750
 —
 —
 —
Total Letters of Credit199,066
 80,994
 118,072
 —
 —
Surety Bonds:         
Employee-Related1,850
 —
 1,850
 —
 —
Environmental11,283
 11,073
 210
 —
 —
Financial Guarantees81,670
 26,400
 55,270
 —
 —
Other9,306
 8,433
 873
 —
 —
Total Surety Bonds104,109
 45,906
 58,203
 —
 —
Total Commitments$303,175
 $126,900
 $176,275
 $—
 $—


Excluded from the above table are commitments and guarantees entered into in conjunction with the spin-off of the Company's coal business (See CNX's 2018 Annual Report on Form 10-K as filed with the SEC on February 7, 2019 for further information).in November 2017. Although CONSOL Energy has agreed to indemnify CNX to the extent that CNX would be called upon to pay any of these liabilities, there is no assurance that CONSOL Energy will satisfy its obligations to indemnify CNX in the event that CNX is so called upon.

CNX enters into long-term unconditional purchase obligations to procure major equipment purchases, natural gas firm transportation, gas drilling services and other operating goods and services. These purchase obligations are not recorded in the Consolidated Balance Sheets. As of September 30, 2019,March 31, 2020, the purchase obligations for each of the next five years and beyond were as follows:
Obligations DueAmount
Less than 1 year$249,924 
1 - 3 years475,567 
3 - 5 years398,180 
More than 5 years1,033,218 
Total Purchase Obligations$2,156,889 
Obligations DueAmount
Less than 1 year$252,535
1 - 3 years489,023
3 - 5 years412,960
More than 5 years1,113,008
Total Purchase Obligations$2,267,526

20


NOTE 14—11—DERIVATIVE INSTRUMENTS:

CNX enters into interest rate swap agreements to manage its exposure to interest rate volatility. These swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. The change in fair value of the interest rate swap agreements are accounted for on a mark-to-market basis with the changes in fair value recorded in current period earnings.

In March 2020, CNX entered into interest rate swap related to $175,000 of borrowings under the Cardinal States Facility and CSG Holdings Facility (See Note 9 - Long-Term Debt). In order to manage exposure to interest rate volatility, each respective entity entered into an interest rate swap for the full outstanding principal amounts inclusive of a put option at 25 basis points. The underlying notional for each swap and put option reduces over time based upon an expected amortization profile for each respective credit facility. In addition, CSG Holdings entered into a call option commencing March 31, 2023.

In June 2019, CNX entered into an interest rate swap agreement to manage its exposure to interest rate volatility. The interest rate swap agreement relatesrelated to $160,000 of borrowings under CNX’s senior secured revolving credit facility (See Note 97 - Revolving Credit Facilities) andwhich has the economic effect of modifying the variable-interest obligation into a fixed-interest obligation over a three-yearthree-year period.

The change In March 2020, this swap was blended and extended via a new interest rate swap, effective April 3, 2020, of a new four-year interest rate swap inclusive of a put option at 0 basis points. Also executed in fair valueMarch 2020 was a new four-year $250,000 interest rate swap inclusive of a put option at 0 basis points, effective April 3, 2020. Consistent with the previous interest rate swap agreement, is accounted for on a mark-to-market basis with changes in fair value recorded in current period earnings. The fair value at September 30, 2019 and the corresponding change in fair value from inception through September 30, 2019$250,000 interest rate swap was nominal.entered into to manage CNX's exposure to interest rate volatility.

CNX enters into financial derivative instruments to manage its exposure to commodity price volatility. These natural gas commodity hedges are accounted for on a mark-to-market basis with changes in fair value recorded in current period earnings.

CNX is exposed to credit risk in the event of non-performance by counterparties. The creditworthiness of counterparties is subject to continuing review. The Company has not experienced any issues of non-performance by derivative counterparties.

None of the Company's counterparty master agreements currently require CNX to post collateral for any of its positions. However, as stated in the counterparty master agreements, if CNX's obligations with one of its counterparties cease to be secured on the same basis as similar obligations with the other lenders under the credit facility, CNX would have to post collateral for instruments in a liability position in excess of defined thresholds. All of the Company's derivative instruments are subject to master netting arrangements with our counterparties. CNX recognizes all financial derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets on a gross basis.


23


 
Each of the Company's counterparty master agreements allows, in the event of default, the ability to elect early termination of outstanding contracts. If early termination is elected, CNX and the applicable counterparty would net settle all open hedge positions.

The total notional amounts of production of CNX's derivative instruments were as follows:
March 31,December 31,Forecasted to
20202019Settle Through
Natural Gas Commodity Swaps (Bcf)1,387.1  1,460.6  2025
Natural Gas Basis Swaps (Bcf)1,235.9  1,290.4  2025
Interest Rate Swaps$585,000  $160,000  2028
 September 30, December 31, Forecasted to
 2019 2018 Settle Through
Natural Gas Commodity Swaps (Bcf)1,502.4
 1,484.4
 2024
Natural Gas Basis Swaps (Bcf)1,240.5
 1,056.6
 2024















21

The gross fair value of CNX's derivative instruments was as follows:
March 31,December 31,
20202019
Current Assets:
  Commodity Derivative Instruments:
     Commodity Swaps$296,834  $234,238  
     Basis Only Swaps15,718  13,556  
  Interest Rate Swaps197  —  
Total Current Assets$312,749  $247,794  
Other Assets:
  Commodity Derivative Instruments:
     Commodity Swaps$244,501  $288,543  
     Basis Only Swaps12,396  25,553  
  Interest Rate Swaps1,214  —  
Total Other Assets$258,111  $314,096  
Current Liabilities:
  Commodity Derivative Instruments:
     Commodity Swaps$5,028  $345  
     Basis Only Swaps41,069  40,626  
  Interest Rate Swaps2,961  495  
Total Current Liabilities$49,058  $41,466  
Non-current Liabilities:
  Commodity Derivative Instruments:
     Commodity Swaps$23,018  $9,693  
     Basis Only Swaps130,572  105,445  
  Interest Rate Swaps10,308  724  
Total Non-current Liabilities$163,898  $115,862  
Asset Derivative Instruments Liability Derivative Instruments
 September 30, December 31,  September 30, December 31,
 2019 2018  2019 2018
Commodity Swaps:        
Prepaid Expense$172,836
 $28,612
 Other Accrued Liabilities$1,389
 $34,640
Other Assets254,967
 164,310
 Other Liabilities17,440
 52,011
Total Asset$427,803
 $192,922
 Total Liability$18,829
 $86,651
         
Basis Only Swaps:        
Prepaid Expense$25,420
 $11,628
 Other Accrued Liabilities$43,437
 $27,021
Other Assets20,925
 48,788
 Other Liabilities98,638
 40,210
Total Asset$46,345
 $60,416
 Total Liability$142,075
 $67,231
























22

The effect of commodity derivative instruments on the Company's Consolidated Statements of Income was as follows:
For the Three Months Ended
March 31,
20202019
Cash Received (Paid) in Settlement of Commodity Derivative Instruments:
  Natural Gas:
Commodity Swaps$157,579  $(26,950) 
Basis Swaps(6,418) (14,432) 
Total Cash Received (Paid) in Settlement of Commodity Derivative Instruments151,161  (41,382) 
Unrealized Gain (Loss) on Commodity Derivative Instruments:
  Natural Gas:
Commodity Swaps545  (50,761) 
Basis Swaps(36,564) (103,233) 
Total Unrealized Loss on Commodity Derivative Instruments(36,019) (153,994) 
Gain (Loss) on Commodity Derivative Instruments:
  Natural Gas:
Commodity Swaps158,124  (77,711) 
Basis Swaps(42,982) (117,665) 
Total Gain (Loss) on Commodity Derivative Instruments$115,142  $(195,376) 
 For the Three Months Ended For the Nine Months Ended
 September 30, September 30,
 2019 2018 2019 2018
Cash Received (Paid) in Settlement of Commodity Derivative Instruments:       
  Natural Gas:       
Commodity Swaps$61,441
 $6,916
 $53,058
 $23,540
Basis Swaps(4,400) (4,091) (26,727) (21,022)
Total Cash Received in Settlement of Commodity Derivative Instruments57,041
 2,825
 26,331
 2,518
        
Unrealized Gain (Loss) on Commodity Derivative Instruments:       
  Natural Gas:       
Commodity Swaps126,617
 27,749
 302,701
 76,999
Basis Swaps30,255
 (12,569) (88,914) (765)
Total Unrealized Gain on Commodity Derivative Instruments156,872
 15,180
 213,787
 76,234
        
Gain (Loss) on Commodity Derivative Instruments:       
  Natural Gas:       
Commodity Swaps188,058
 34,665
 355,759
 100,539
Basis Swaps25,855
 (16,660) (115,641) (21,787)
Total Gain on Commodity Derivative Instruments$213,913
 $18,005
 $240,118
 $78,752


During the three months ended March 31, 2020, cash of $57 was paid in settlement of interest rate swaps, and an unrealized loss of $10,639 was recognized, resulting in a total loss on interest rate swaps of $10,696, which is included in Interest Expense in the Consolidated Statements of Income.


Cash Received in Settlement of Commodity Derivative Instruments for the three months ended March 31, 2020 includes$54,982 related the monetization of certain NYMEX commodity swaps.. The monetization resulted from reducing the contract swap prices of certain 2022, 2023, and 2024 NYMEX natural gas swap contracts. The notional quantities of the contracts were not changed by the monetization.Net proceeds received from the monetization are classified as operating cash flows in the Consolidated Statements of Cash Flows
24


The Company also enters into fixed price natural gas sales agreements that are satisfied by physical delivery. These physical commodity contracts qualify for the normal purchases and normal sales exception and are not subject to derivative instrument accounting.

NOTE 15—12—FAIR VALUE OF FINANCIAL INSTRUMENTS:

CNX 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 NYMEX forward curves, LIBOR-based discount rates and basis forward curves), while unobservable inputs reflect the Company'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 1 - Quoted prices for identical instruments in active markets.
Level 2 - 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 NYMEX forward curves, LIBOR-based discount rates and basis forward curves.

23

Level 3 - Unobservable inputs significant to the fair value measurement supported by little or no market activity.
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 financial instrument measured at fair value on a recurring basis is summarized below:
 Fair Value Measurements at March 31, 2020Fair Value Measurements at December 31, 2019
DescriptionLevel 1Level 2Level 3Level 1Level 2Level 3
Gas Derivatives$—  $369,762  $—  $—  $405,781  $—  
Interest Rate Swaps$—  $(11,858) $—  $—  $(1,219) $—  
 Fair Value Measurements at September 30, 2019 Fair Value Measurements at December 31, 2018
Description

(Level 1)
 

(Level 2)
 

(Level 3)
 

(Level 1)
 

(Level 2)
 

(Level 3)
Gas Derivatives$—
 $313,244
 $—
 $—
 $99,456
 $—


The carrying amounts and fair values of financial instruments for which the fair value option was not elected are as follows:
 September 30, 2019 December 31, 2018
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Cash and Cash Equivalents$5,484
 $5,484
 $17,198
 $17,198
Long-Term Debt (Excluding Debt Issuance Costs)$2,649,802
 $2,505,114
 $2,387,001
 $2,290,537

 March 31, 2020December 31, 2019
 Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Cash and Cash Equivalents$31,833  $31,833  $16,283  $16,283  
Long-Term Debt (Excluding Debt Issuance Costs)$2,676,617  $2,308,846  $2,763,433  $2,619,676  
Cash and cash equivalents represent highly- liquidhighly-liquid instruments and constitute Level 1 fair value measurements. Certain of the Company’s debt is actively traded on a public market and, as a result, constitute Level 1 fair value measurements. The portion of the Company’s debt obligations that is not actively traded is valued through reference to the applicable underlying benchmark rate and, as a result, constitute Level 2 fair value measurements.

NOTE 16—13—VARIABLE INTEREST ENTITIES:

The Company determined CNXM of which the Company owns an approximately 34% limited partner interest and 100% of the general partner interest, to be a variable interest entity. As a result of the Midstream Acquisition (see Note 5 - Acquisitions and Dispositions), theThe Company has the power through the Company'sits ownership and control of CNXM's general partner (CNX Midstream GP LLC) to direct the activities that most significantly impact CNXM's economic performance. In addition, through its limited partner interest and incentive distribution rights, or IDRs, in CNXM, the Company has the obligation to absorb the losses of CNXM and the right to receive benefits in accordance with such interests. As the Company has a controlling financial interest and is the primary beneficiary of CNXM, the Company consolidated CNXM commencing January 3, 2018.consolidates CNXM.

The risks associated with the operations of CNXM are discussed in its Annual Report on Form 10-K for the year ended December 31, 20182019 filed with the SEC on February 7, 201910, 2020 and its other periodic reports filed after that date.thereafter.


On January 29, 2020, CNX and CNXM executed definitive agreements to eliminate CNXM's incentive distribution rights, or IDRs, held by its general partner and to convert the 2.0% general partner interest in CNXM into a non-economic general partnership interest (collectively, the "IDR Elimination Transaction").

Pursuant to the IDR Elimination Transaction agreements, CNX received the following consideration in exchange for the cancellation of the IDRs and conversion of the 2.0% general partner interest:

•26 million CNXM common units;
•3 million new CNXM Class B units. The newly issued Class B units will not receive or accrue distributions until January 1, 2022 at which time they will automatically convert into CNXM common units on a one-for-one basis; and
•$135,000 to be paid in three installments as follows: $50,000 due December 31, 2020, $50,000 due December 31, 2021 and $35,000 due December 31, 2022.

After giving effect to the IDR Elimination Transaction, CNX now owns 47.7 million common units, or approximately 53%, of the outstanding limited partner interests in CNXM, excluding the Class B units. Prior to the IDR Elimination Transaction, the Company owned approximately 34% of the outstanding limited partner interest and 100% of the general partner interest. Upon conversion of the Class B units to CNXM common units on January 1, 2022, CNX's ownership will increase to 50.7 million common units or approximately 56.5% of the outstanding limited partner interest in CNXM on a proforma basis.



2524



The following table presents amounts included in the Company's Consolidated Balance Sheets that were for the use or obligation of CNXM:
March 31,December 31,
20202019
Assets:
     Cash$5,235  $31  
     Receivables - Related Party21,714  21,076  
     Receivables - Third Party4,980  7,935  
     Other Current Assets2,064  1,976  
     Property, Plant and Equipment, net1,200,544  1,195,591  
     Operating Lease ROU Asset3,225  4,731  
     Other Assets2,945  3,262  
Total Assets$1,240,707  $1,234,602  
Liabilities:
     Accounts Payable and Accrued Liabilities$32,223  $67,290  
     Accounts Payable - Related Party51,688  4,787  
     Revolving Credit Facility347,000  311,750  
     Long-Term Debt394,399  394,162  
     Long-Term Liabilities - Related Party85,000  —  
Total Liabilities$910,310  $777,989  
 September 30, December 31,
 2019 2018
Assets:   
Cash$1,735
 $3,966
Receivables - Related Party17,845
 17,073
Receivables - Third Party6,074
 7,028
Other Current Assets1,646
 2,383
Property, Plant and Equipment, net1,144,177
 891,775
Operating Lease ROU Asset6,281
 —
Other Assets3,508
 3,203
Total Assets$1,181,266
 $925,428
Liabilities:   
Accounts Payable and Accrued Liabilities$99,118
 $43,919
Accounts Payable - Related Party3,788
 4,980
Revolving Credit Facility246,000
 84,000
Long-Term Debt393,925
 393,215
Long-Term Operating Lease Liabilities40
 —
Total Liabilities$742,871
 $526,114

The following table summarizes CNXM's Consolidated Statements of Operations and Cash Flows, inclusive of affiliate amounts:
 For the Three Months Ended March 31,
20202019
Revenue
Gathering Revenue - Related Party$62,178  $53,776  
Gathering Revenue - Third Party17,953  18,443  
Miscellaneous Income65  —  
Total Revenue80,196  72,219  
Expenses
Operating Expense - Related Party3,828  5,548  
Operating Expense - Third Party8,596  5,974  
General and Administrative Expense - Related Party2,857  3,967  
General and Administrative Expense - Third Party2,765  1,536  
(Gain) Loss on Asset Sales and Abandonments(11) 7,229  
Depreciation Expense7,578  5,650  
Interest Expense8,793  7,339  
Total Expense34,406  37,243  
Net Income$45,790  $34,976  
Net Cash Provided by Operating Activities$40,123  $49,913  
Net Cash Used in Investing Activities$(32,659) $(78,557) 
Net Cash (Used in) Provided by Financing Activities$(2,260) $24,748  
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2019 2018 2019 2018
Revenue       
Gathering Revenue - Related Party$55,453
 $41,022
 $168,434
 $116,328
Gathering Revenue - Third Party18,523
 19,946
 55,862
 69,523
Total Revenue73,976
 60,968
 224,296
 185,851
Expenses       
Operating Expense - Related Party6,105
 5,131
 18,167
 14,645
Operating Expense - Third Party5,612
 4,870
 17,774
 20,744
General and Administrative Expense - Related Party3,573
 3,060
 11,567
 10,292
General and Administrative Expense - Third Party1,236
 1,771
 4,136
 6,639
Loss on Asset Sales and Abandonments—
 —
 7,229
 2,501
Depreciation Expense6,184
 5,306
 17,694
 16,605
Interest Expense7,601
 7,255
 22,625
 16,863
Total Expense30,311
 27,393
 99,192
 88,289
Net Income$43,665
 $33,575
 $125,104
 $97,562
        
Net Cash Provided by Operating Activities$51,014
 $35,666
 $175,680
 $131,207
Net Cash Used in Investing Activities$(68,289) $(44,241) $(251,156) $(79,366)
Net Cash Provided by (Used in) Financing Activities$7,333
 $8,818
 $73,245
 $(54,085)


InAt March 2018, CNXM closed on its acquisition of CNX's remaining 95% interest in the gathering system and related assets commonly referred to as the Shirley-Penns System, in exchange for cash consideration in the amount of $265,000. CNXM funded the cash consideration with proceeds from the issuance of its 6.50% senior notes due 2026 (See Note 11 - Long-Term Debt).
At September 30, 201931, 2020 and December 31, 2018,2019, excluding amounts related to the IDR Elimination Transaction, CNX had a net payable of $14,085$20,085 and $12,202$16,362 respectively, due to CNX Gathering and CNXM, primarily for accrued but unpaid gathering services.



2625



NOTE 17—14—SEGMENT INFORMATION:
CNX consists of 2 principal business divisions: Exploration and Production (E&P) and Midstream. The principal activity of the E&P Division, which includes 4 reportable segments, is to produce pipeline quality natural gas for sale primarily to gas wholesalers. The E&P Division's reportable segments are Marcellus Shale, Utica Shale, Coalbed Methane, and Other Gas. The Other Gas Segment is primarily related to shallow oil and gas production which is not significant to the Company due to the sale of substantially all of CNX's shallow oil and gas assets in the 2018 period (See Note 5 - Acquisitions and Dispositions for more information).Company. It also includes the Company's purchased gas activities, unrealized gain or loss on commodity derivative instruments, realized gain on commodity derivative instruments that were partially monetized prior to their settlement dates, exploration and production related other costs, impairments of exploration and production properties, as well as various other operating activities assigned to the E&P Division but not allocated to each individual segment.
CNX's Midstream Division's principal activity is the ownership, operation, development and acquisition of natural gas gathering and other midstream energy assets of CNX Gathering and CNXM, which provide natural gas gathering services for the Company's produced gas, as well as for other independent third-parties in the Marcellus Shale and Utica Shale in Pennsylvania and West Virginia. Excluded from the Midstream Division are the gathering assets and operations of CNX that have not been contributed to CNX Gathering and CNXM. As a result of the Midstream Acquisition (See Note 5 - Acquisitions and Dispositions for more information), CNX owns and controls 100% of CNX Gathering, making CNXM a single-sponsor master limited partnership and thus the Company began consolidating CNXM on January 3, 2018.consolidates CNXM. The Midstream Division is comprised of a single Midstream segment.
The Company's unallocated expenses include other income/expense, gain on asset sales related to non-core assets, gain on previously held equity interest, gain/loss on debt extinguishment impairment of other intangible assets and income taxes.
In the preparation of the following information, intersegment sales have been recorded at amounts approximating market prices. Operating profit for each segment is based on sales less identifiable operating and non-operating expenses. Assets are reflected at the division level for E&P and are not allocated between each individual E&P segment. These assets are not allocated to each individual segment due to the diverse asset base controlled by CNX, whereby each individual asset may service more than one segment within the division. An allocation of such asset base would not be meaningful or representative on a segment by segment basis.


26
27


Industry segment results for the three months ended September 30, 2019:March 31, 2020:
 
 
Marcellus
Shale
 Utica Shale Coalbed Methane 
Other
Gas
 
Total
E&P
 Midstream Unallocated Intercompany Eliminations Consolidated 
Natural Gas, NGLs and Oil Revenue$179,142
 $50,042
 $35,621
 $246
 $265,051
 $—
 $—
 $—
 $265,051
(A)
Purchased Gas Revenue—
 —
 —
 29,192
 29,192
 —
 —
 —
 29,192
  
Midstream Revenue—
 —
 —
 —
 —
 74,261
 —
 (55,736) 18,525
  
Gain on Commodity Derivative Instruments38,354
 12,628
 6,036
 156,895
 213,913
 —
 —
 —
 213,913
 
Other Operating Income—
 —
 —
 3,375
 3,375
 —
 —
 (59) 3,316
(B)
Total Revenue and Other Operating Income$217,496
 $62,670
 $41,657
 $189,708
 $511,531
 $74,261
 $—
 $(55,795) $529,997
  
Earnings Before Income Tax$41,014
 $18,220
 $8,717
 $83,279
 $151,230
 $41,741
 $(109) $—
 $192,862
 
Segment Assets        $7,087,782
 $2,178,073
 $16,668
 $3,735
 $9,286,258
(C)
Depreciation, Depletion and Amortization        $111,839
 $8,620
 $—
 $—
 $120,459
  
Capital Expenditures        $267,689
 $68,448
 $—
 $—
 $336,137
  

(A)Included in Total Natural Gas, NGLs and Oil Revenue are sales of $39,092 to Direct Energy Business Marketing LLC, which comprises over 10% of revenue from contracts with external customers for the period.
(B)Includes equity in earnings of unconsolidated affiliates of $673 for Total E&P.
(C)Includes investments in unconsolidated equity affiliates of $17,110 for Total E&P.

Marcellus
Shale		Utica ShaleCoalbed MethaneOther
Gas		Total
E&P		MidstreamUnallocatedIntercompany EliminationsConsolidated
Natural Gas, NGL and Oil Revenue$179,044  $41,450  $30,723  $277  $251,494  $—  $—  $—  $251,494  (A)
Purchased Gas Revenue—  —  —  26,359  26,359  —  —  —  26,359    
Midstream Revenue—  —  —  —  —  80,341  —  (61,935) 18,406    
Gain on Commodity Derivative Instruments68,452  18,000  9,687  19,003  115,142  —  —  —  115,142  
Other Operating Income—  —  —  5,466  5,466  —  —  (508) 4,958  (B)
Total Revenue and Other Operating Income$247,496  $59,450  $40,410  $51,105  $398,461  $80,341  $—  $(62,443) $416,359    
Total Operating Expense$183,172  $48,817  $34,254  $138,585  $404,828  $500,915  $—  $(62,443) $843,300  (C)
Earnings (Loss) Before Income Tax$64,324  $10,633  $6,156  $(127,666) $(46,553) $(429,544) $18,293  $—  $(457,804) 
Segment Assets$6,785,652  $1,754,819  $147,094  $(158,615) $8,528,950  (D)
Depreciation, Depletion and Amortization$119,152  $10,012  $—  $—  $129,164    
Capital Expenditures$119,393  $32,656  $—  $—  $152,049    

(A)  Included in Total Natural Gas, NGL and Oil Revenue are sales of $45,656 to Direct Energy Business Marketing LLC and $32,176 to NJR Energy Services Company, each of which comprises over 10% of revenue from contracts with external customers for the period.
(B) Includes equity in loss of unconsolidated affiliates of $161 for Total E&P.
(C) Included in Marcellus and Utica are $59,176 and $2,759, respectively of intercompany gathering fees. Included in Midstream is a goodwill impairment charge of $473,045 (See Note 6 - Goodwill and Other Intangible Assets for more information).
(D) Includes investments in unconsolidated equity affiliates of $16,549 for Total E&P.

Industry segment results for the three months ended September 30, 2018:March 31, 2019:
 
Marcellus
Shale		Utica ShaleCoalbed MethaneOther
Gas		Total
E&P		MidstreamUnallocatedIntercompany EliminationsConsolidated
Natural Gas, NGL and Oil Revenue$293,257  $92,951  $49,835  $(97) $435,946  $—  $—  $—  $435,946  (D)
Purchased Gas Revenue—  —  —  16,221  16,221  —  —  —  16,221    
Midstream Revenue—  —  —  —  —  72,569  —  (54,126) 18,443    
Loss on Commodity Derivative Instruments(27,458) (9,601) (4,302) (154,015) (195,376) —  —  —  (195,376) 
Other Operating Income—  —  —  3,258  3,258  —  —  (61) 3,197  (E)
Total Revenue and Other Operating Income$265,799  $83,350  $45,533  $(134,633) $260,049  $72,569  $—  $(54,187) $278,431    
Total Operating Expense$178,868  $50,333  $32,634  $76,217  $338,052  $24,962  $—  $(54,187) $308,827  (F)
Earnings (Loss) Before Income Tax$86,931  $33,017  $12,899  $(239,277) $(106,430) $32,584  $(2,364) $—  $(76,210) 
Segment Assets$6,638,207  $2,011,616  $137,564  $(10,026) $8,777,361  (G)
Depreciation, Depletion and Amortization$117,075  $8,086  $—  $—  $125,161    
Capital Expenditures$223,791  $75,347  $—  $—  $299,138    
 Marcellus
Shale		 Utica Shale Coalbed Methane Other
Gas		 Total
E&P		 Midstream Unallocated Intercompany Eliminations Consolidated 
Natural Gas, NGLs and Oil Revenue$207,407
 $88,039
 $48,471
 $795
 $344,712
 $—
 $—
 $—
 $344,712
(D)
Purchased Gas Revenue—
 —
 —
 10,560
 10,560
 —
 —
 —
 10,560
  
Midstream Revenue—
 —
 —
 —
 —
 61,372
 —
 (41,426) 19,946
  
Gain (Loss) on Commodity Derivative Instruments1,796
 (151) 605
 15,755
 18,005
 —
 —
 —
 18,005
 
Other Operating Income—
 —
 —
 3,969
 3,969
 —
 —
 (66) 3,903
(E)
Total Revenue and Other Operating Income$209,203
 $87,888
 $49,076
 $31,079
 $377,246
 $61,372
 $—
 $(41,492) $397,126
  
Earnings (Loss) Before Income Tax$64,408
 $41,237
 $9,642
 $(60,856) $54,431
 $31,173
 $117,830
 $—
 $203,434
 
Segment Assets        $6,256,132
 $1,883,134
 $82,696
 $(12,926) $8,209,036
(F)
Depreciation, Depletion and Amortization        $111,844
 $7,741
 $—
 $—
 $119,585
  
Capital Expenditures        $253,263
 $44,202
 $—
 $—
 $297,465
  


(D)  Included in Total Natural Gas, NGL and Oil Revenue are sales of $67,769 to Direct Energy Business Marketing LLC and $66,001 to NJR Energy Services Company, each of which comprises over 10% of revenue from contracts with external customers for the period.
(D)Included in Total Natural Gas, NGLs and Oil Revenue are sales of $42,901 to NJR Energy Services Company, which comprises over 10% of revenue from contracts with external customers for the period.
(E)Includes equity in earnings of unconsolidated affiliates of $1,241
(E) Includes equity in earnings of unconsolidated affiliates of $503 for Total E&P.
(F) Included in Marcellus and Utica are $53,462 and $664, respectively of intercompany gathering fees.
(G) Includes investments in unconsolidated equity affiliates of $17,860 for Total E&P.
(F)Includes investments in unconsolidated equity affiliates of $19,488 for Total E&P.





2827



Industry segment results for the nine months ended September 30, 2019:
 
Marcellus
Shale
 Utica Shale Coalbed Methane 
Other
Gas
 
Total
E&P
 Midstream Unallocated Intercompany Eliminations Consolidated 
Natural Gas, NGLs and Oil Revenue$709,656
 $208,206
 $125,094
 $906
 $1,043,862
 $—
 $—
 $—
 $1,043,862
(A)
Purchased Gas Revenue—
 —
 —
 64,181
 64,181
 —
 —
 —
 64,181
  
Midstream Revenue—
 —
 —
 —
 —
 225,280
 —
 (169,417) 55,863
  
Gain on Commodity Derivative Instruments17,727
 5,774
 2,819
 213,798
 240,118
 —
 —
 —
 240,118
 
Other Operating Income—
 —
 —
 9,671
 9,671
 —
 —
 (235) 9,436
(B)
Total Revenue and Other Operating Income$727,383
 $213,980
 $127,913
 $288,556
 $1,357,832
 $225,280
 $—
 $(169,652) $1,413,460
  
Earnings (Loss) Before Income Tax$178,326
 $68,165
 $29,219
 $(42,650) $233,060
 $118,739
 $(1,662) $—
 $350,137
 
Segment Assets        $7,087,782
 $2,178,073
 $16,668
 $3,735
 $9,286,258
(C)
Depreciation, Depletion and Amortization        $349,620
 $24,999
 $—
 $—
 $374,619
  
Capital Expenditures        $716,164
 $248,338
 $—
 $—
 $964,502
  

(A)Included in Total Natural Gas, NGLs and Oil Revenue are sales of $155,337 to Direct Energy Business Marketing LLC and $114,440 to NJR Energy Services Company, each of which comprise over 10% of revenue from contracts with external customers for the period.
(B)Includes equity in earnings of unconsolidated affiliates of $1,703 for Total E&P.
(C)Includes investments in unconsolidated equity affiliates of $17,110 for Total E&P.

Industry segment results for the nine months ended September 30, 2018:
 Marcellus
Shale		 Utica Shale Coalbed Methane Other
Gas		 Total
E&P		 Midstream Unallocated Intercompany Eliminations Consolidated 
Natural Gas, NGLs and Oil Revenue$590,728
 $326,119
 $152,854
 $15,150
 $1,084,851
 $—
 $—
 $—
 $1,084,851
(D)
Purchased Gas Revenue—
 —
 —
 38,546
 38,546
 —
 —
 —
 38,546
  
Midstream Revenue—
 —
 —
 —
 —
 186,875
 —
 (117,191) 69,684
  
Gain on Commodity Derivative Instruments1,411
 746
 330
 76,265
 78,752
 —
 —
 —
 78,752
 
Other Operating Income—
 —
 —
 23,355
 23,355
 —
 —
 (209) 23,146
(E)
Total Revenue and Other Operating Income$592,139
 $326,865
 $153,184
 $153,316
 $1,225,504
 $186,875
 $—
 $(117,400) $1,294,979
  
Earnings (Loss) Before Income Tax$155,923
 $143,830
 $35,164
 $(138,551) $196,366
 $94,502
 $702,097
 $—
 $992,965
 
Segment Assets        $6,256,132
 $1,883,134
 $82,696
 $(12,926) $8,209,036
(F)
Depreciation, Depletion and Amortization        $338,834
 $24,504
 $—
 $—
 $363,338
  
Capital Expenditures        $708,660
 $85,464
 $—
 $—
 $794,124
  

(D)Included in Total Natural Gas, NGLs and Oil Revenue are sales of $158,746 to NJR Energy Services Company, which comprises over 10% of revenue from contracts with external customers for the period.
(E)Includes equity in earnings of unconsolidated affiliates of $4,688 for Total E&P.
(F)Includes investments in unconsolidated equity affiliates of $19,488 for Total E&P.



29


Reconciliation of Segment Information to Consolidated Amounts:

Revenue and Other Operating Income
For the Three Months Ended March 31,
20202019
Total Segment Revenue from Contracts with External Customers$296,259  $470,610  
Gain (Loss) on Commodity Derivative Instruments115,142  (195,376) 
Other Operating Income4,958  3,197  
Total Consolidated Revenue and Other Operating Income$416,359  $278,431  
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
2019 2018 2019 2018
Total Segment Revenue from Contracts with External Customers$312,768
 $375,218
 $1,163,906
 $1,193,081
Gain on Commodity Derivative Instruments213,913
 18,005
 240,118
 78,752
Other Operating Income3,316
 3,903
 9,436
 23,146
Total Consolidated Revenue and Other Operating Income$529,997
 $397,126
 $1,413,460
 $1,294,979


EarningsLoss Before Income Tax: 
For the Three Months Ended March 31,
20202019
Segment Earnings (Loss) Before Income Taxes for Reportable Business Segments:
E&P$(46,553) $(106,430) 
Midstream(429,544) 32,584  
Total Segment Earnings (Loss) Before Income Taxes for Reportable Business Segments$(476,097) $(73,846) 
Unallocated Expenses:
Other (Expense) Income(5,013) 1,030  
Gain on Certain Asset Sales12,043  4,143  
Gain (Loss) on Debt Extinguishment11,263  (7,537) 
Loss Before Income Tax$(457,804) $(76,210) 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2019 2018 2019 2018
Segment Income Before Income Taxes for Reportable Business Segments:       
Total E&P$151,230
 $54,431
 $233,060
 $196,366
Midstream41,741
 31,173
 118,739
 94,502
Total Segment Income Before Income Taxes for Reportable Business Segments$192,971
 $85,604
 $351,799
 $290,868
Unallocated Expenses:       
Other (Expense) Income(3,109) (1,105) (1,578) 4,811
Gain on Certain Asset Sales3,000
 134,320
 7,530
 146,706
Gain on Previously Held Equity Interest—
 —
 —
 623,663
Loss on Debt Extinguishment—
 (15,385) (7,614) (54,433)
Impairment of Other Intangible Assets—
 —
 —
 (18,650)
Earnings Before Income Tax$192,862
 $203,434
 $350,137
 $992,965


Total Assets:
March 31,
20202019
Segment Assets for Total Reportable Business Segments:
E&P$6,785,652  $6,638,207  
Midstream1,754,819  2,011,616  
Intercompany Eliminations(158,615) (10,026) 
Items Excluded from Segment Assets:
Cash and Cash Equivalents
31,833  23,972  
Recoverable Income Taxes
115,261  113,592  
Total Consolidated Assets$8,528,950  $8,777,361  
 September 30,
2019 2018
Segment Assets for Total Reportable Business Segments:   
E&P$7,087,782
 $6,256,132
Midstream2,178,073
 1,883,134
Intercompany Eliminations3,735
 (12,926)
Items Excluded from Segment Assets:   
Cash and Cash Equivalents

5,484
 42,672
Recoverable Income Taxes

11,184
 40,024
Total Consolidated Assets$9,286,258
 $8,209,036



28

30


NOTE 18—15—STOCK REPURCHASE:
Since the October 30, 2017 inception of the current stock repurchase program, CNX's Board of Directors has approved in total a $750,000 stock repurchase program, which is not subject to an expiration date. The repurchases may be affected from time-to-time through open market purchases, privately negotiated transactions, Rule 10b5-1 plans, accelerated stock repurchases, block trades, derivative contracts or otherwise in compliance with Rule 10b-18. The timing of any repurchases will be based on a number of factors, including available liquidity, the Company's stock price, the Company's financial outlook, and alternative investment options. The stock repurchase program does not obligate the Company to repurchase any dollar amount or number of shares and the Board may modify, suspend, or discontinue its authorization of the program at any time. The Board of Directors will continue to evaluate the size of the stock repurchase program based on CNX's free cash flow position, leverage ratio, and capital plans. During the ninethree months ended September 30,March 31, 2019, 12,929,4873,121,054 shares were repurchased and retired at an average price of $8.91$10.71 per share for a total cost of $115,477.$33,497. There were 0 shares repurchased and retired during the three months ended March 31, 2020.

NOTE 19—16—RECENT ACCOUNTING PRONOUNCEMENTS:

In May 2019,March 2020, the FASB issued ASU 2019-052020-04 - Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Instruments - Credit LossesReporting (Topic 326), which848). This ASU provides optional targeted transition reliefexpedient and exceptions for applying generally accepted accounting principles to entities adopting ASU 2016-13. ASU 2016-13 replacescontracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the incurred loss impairment methodology with a methodology that reflects expected credit lossesconcerns about structural risks of interbank offered rates (IBORs) and, requires considerationparticularly, the risk of a broader range of reasonable and supportable information to inform credit loss estimates. The measurement of expected credit losses will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectabilitycessation of the reported amount.London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The ASU 2019-05 provides companies with optional guidance to ease the optionpotential accounting burden associated with transitioning away from reference rates that are expected to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets.be discontinued. The amendments in this ASU will be applied using the modified-retrospective approach and, for public entities, are effective for fiscal years beginning afterall entities as of March 12, 2020 through December 15, 201931, 2022. The Company is still evaluating the effect of adopting this guidance.

In March 2020, the FASB issued ASU 2020-03 - Codification Improvements to Financial Instruments. This ASU improves and interim periods within those annual periods. Early adoption is permitted.clarifies various financial instruments topics, including the CECL standard (see Note 1 - Basis of Presentation for more information). The ASU includes seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments in this ASU have different effective dates. The adoption of this guidance is not expected to have a material impact on the Company's financial statements.


NOTE 17—SUBSEQUENT EVENTS:

CNX is closely monitoring the impact of the coronavirus COVID-19 ("COVID-19") pandemic on all aspects of our business and geographies, including how it may impact our customers, employees, vendors and contractors. While we did not incur significant disruptions during the three months ended March 31, 2020 from COVID-19, we are unable to predict the impact that the COVID-19 pandemic will have on our financial position, operating results and ability to obtain future financing due to numerous uncertainties.

The federal Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020. CNX continues to assess the potential impacts of this recently enacted legislation on its financial position and results of operations.

In April 2020, the Company repurchased $7,625 of its outstanding 5.875% senior notes due in April 2022 at an average price equal to 91.9% of the principal amount.





3129


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Form 10-Q. The information provided below supplements, but does not form part of, CNX's financial statements. This discussion contains forward-looking statements that are based on the current views and beliefs of management, as well as assumptions and estimates made by management. Actual results could differ materially from any such forward-looking statements as a result of various risk factors, including those that may not be in the control of management. For further information on items that could impact future operating performance or financial condition, please see “Part II. Item 1A. Risk Factors” and the section entitled “Forward-Looking Statements” and the “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2019, which we filed with the SEC on February 10, 2020. CNX does not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

General

CNX is closely monitoring the current and potential impacts of the coronavirus COVID-19 ("COVID-19") pandemic on all aspects of our business and geographies, including how it has impacted, and may in the future impact our operations, financial results, liquidity, contractors, customers, employees and vendors. The Company continues to monitor a number of factors that may cause actual results of operations to differ from our historical results or current expectations. These factors include: the impact of the COVID-19 pandemic and the related economic downturn, the historically low natural gas and natural gas liquids prices and ramifications of the crude oil price war between the Organization of Petroleum Exporting Countries ("OPEC") /Saudi Arabia and Russia that occurred in March. While OPEC agreed in April to cut production, downward pressure on prices has continued and could continue for the foreseeable future, particularly given concerns over available storage capacity for refined products such as crude, and refinery inputs including condensate, c5+ and butane. These and other factors could affect the Company’s operations, earnings and cash flows for any period and could cause such results to not be comparable to those of the same period in previous years. The results presented in this Form 10-Q are not necessarily indicative of future operating results.

While CNX did not incur significant disruptions to operations during the three months ended March 31, 2020 as a result of the COVID-19 pandemic, CNX is unable to predict the impact that the COVID-19 pandemic will have on us, including our financial position, operating results, liquidity and ability to obtain financing in future reporting periods, due to numerous uncertainties. These uncertainties include the severity of the virus, the duration of the outbreak, governmental or other actions taken to combat the virus (which could include limitations on our operations or the operations of our customers and vendors), and the effect that the COVID-19 pandemic and the current oil price wars have on the demand for natural gas and natural gas liquids. The health of our employees, contractors and vendors, and our ability to meet staffing needs in our operations and certain critical functions cannot be predicted and is vital to our operations. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets as well as other unanticipated consequences remain unknown. In addition, CNX cannot predict the impact that COVID-19 will have on our customers, vendors and contractors; however, any material effect on these parties could adversely impact CNX. For instance, in the short term, CNX is starting to see a reduction in overall service and materials costs, due to oversupply of those services and costs, since industrial production has waned. However, if services providers to our industry are forced into bankruptcy or otherwise consolidate due to weakening economic conditions, demand could outpace supply in the long-term and cause these costs to increase. The situation surrounding COVID-19 remains fluid and unpredictable, and CNX is actively managing our response in collaboration with our contractors, customers, employees and vendors and assessing potential impacts to our financial position and operating results, as well as any adverse developments that could impact our business.

CNX has also taken, and is continuing to take, proactive steps to manage any disruption in our business caused by COVID-19. For instance, even though our operations were not required to close, CNX was an early adopter in employing a work-from-home system, even before any government mandate on non-essential businesses was enacted. CNX increased its technology platform, infrastructure and security to allow for a work-from-home environment ahead of the actual need, and therefore, once the hypothetical became a reality, we believe CNX was ahead of many companies in this respect. CNX has also deployed additional safety protocols at our field sites in order to keep our employees and contractors safe and to keep our operations running without material disruption.

For further information regarding the impact of COVID-19 see Risk factors in Item 1A of this Form 10-Q.







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Marketing Update:

The markets for natural gas, NGL, and crude oil remain volatile, and prices may continue to fluctuate in response to, among other things: Geopolitical factors, such as events that may reduce or increase production from particular oil-producing regions and/or from members of OPEC, and global events, such as the ongoing COVID-19 outbreak. Since the beginning of 2020, NYMEX oil prices have moved downward due in part to concerns about COVID-19 and its impact on near-term worldwide oil demand and due to the increase in oil production by certain members of OPEC. This oversupply of oil has caused historically low oil prices, which has compounded the impact of the domestic oversupply of NGLs as well as current export constraints and has driven NGL prices to historic lows. While OPEC agreed in April to cut production, downward pressure on prices has continued and could continue for the foreseeable future, particularly given concerns over available storage capacity for refined products such as crude, and refinery inputs including condensate, c5+ and butane, that could result in temporary reductions in CNX’s wet gas production. During the three months ended March 31, 2020, liquids comprised seven percent of CNX’s revenue from external customers.

Continued strength in natural gas production, along with reduced heating demand for natural gas as a result of relatively mild winter temperatures throughout most of the United States, accounted for relatively higher inventory levels. Despite an April 12 agreement by the OPEC and it’s allies to reduce global production by approximately 10%, the economic slowdown and stay-at-home orders has continued to decrease demand for natural gas. The U.S. Energy Information Administration’s (“EIA”) Short-Term Energy Outlook for April 2020 forecasts are subject to heightened uncertainty because of the economic slowdown and significant changes in energy markets recently.

For the first quarter of 2020 and 2019, CNX's average sales price for natural gas, natural gas liquids (NGL), oil, and condensate was $2.59 per Mcfe and $2.97 per Mcfe, respectively. The average realized price for all liquids for the first quarter of 2020 was $15.14 per barrel compared to $27.41 per barrel in 2019 quarter.

CNX's weighted average differential from NYMEX in the first quarter of 2020 was negative $0.26 per MMBtu. CNX's average sales price for natural gas before hedging decreased 14.5% to $1.83 per Mcf compared with the average sales price of $2.14 per Mcf in the fourth quarter of 2019. This decrease results from a lower Henry Hub price offset in part by improved basis pricing. Including the impact of cash settlements from hedging and excluding cash from hedge monetization, CNX's average sales price for natural gas was $0.13 per Mcf, or 5.0%, higher than the three months ended December 31, 2019, and $0.28 per Mcf, or 9.7%, lower than the three months ended March 31, 2019.

During the thirdfirst quarter of 2019,2020, CNX sold 128.3134.4 Bcfe of produced natural gas, an increase of 7.8%1.1% from the 119.0133.0 Bcfe sold in the year-earlier quarter, primarily due to an increase in Marcellus Shale volumes. The increase was offset, in part, by a decrease in Utica Shale volumes due to the sale of substantially all of CNX's Ohio Utica joint venture ("JV") assets in the third quarter of 2018.volumes. Total quarterly production costs increaseddecreased to $1.99$1.98 per Mcfe, compared to the year-earlier quarter of $1.97$1.99 per Mcfe, driven primarily by increasesa decrease in lease operating expenses offset, in part, by an increase in transportation, gathering and compression, offset, in part, by reductions in depreciation, depletion and amortization and lease operating expense.compression. Capital expenditures increaseddecreased to $336$152 million in the thirdfirst quarter of 2019,2020, compared to $297$299 million of spend in the thirdfirst quarter of 2018.2019.
Marketing Update:
For the third quarter of 2019, CNX's average sales price for natural gas, natural gas liquids (NGLs), oil, and condensate was $2.51 per Mcfe. The average realized price for all liquids for the third quarter of 2019 was $14.26 per barrel.

CNX's weighted average differential from NYMEX in the third quarter of 2019 was negative $0.33 per MMBtu. CNX's average sales price for natural gas before hedging decreased 18.7% to $2.04 per Mcf compared with the average sales price of $2.51 per Mcf in the second quarter of 2019. This decrease resulted primarily from a lower Henry Hub price reflecting current general market conditions coupled with a wider differential. Including the impact of cash settlements from hedging, CNX's average sales price for natural gas was $0.08 per Mcf, or 3.1%, lower than the three months ended June 30, 2019, and $0.23 per Mcf, or 8.4%, lower than the three months ended September 30, 2018.

CNX Guidance:

CNX updates 2019 production volumes to 530-540 Bcfe, compared to the previous guidance of 510-530 Bcfe. CNX updates 2020 production volumes to 535-565 Bcfe, compared to the previous guidance of 570-595 Bcfe. The updated 2020 guidance equates to an approximately 3% increase over 2019's updated midpoint.

Third quarter 2019 capital expenditure came in lower than expected, and the company is reducing its full-year 2019 capital guidance, while increasing production volumes. For 2020, the company is reducing its full-year capital guidance and production volumes, primarily due to plan changes and associated timing.

For 2019 and 2020 combined, the company expects to spend approximately $80 million less capital than previously announced, resulting in 17.5 Bcfe less production in 2020, after accounting for 15 Bcfe of production accelerated from 2020 into 2019.

Total hedged natural gas production in the 2019 fourth2020 second quarter is 115.7113.5 Bcf. The annual gas hedge position is shown in the table below:
20202021
Volumes Hedged (Bcf), as of 4/21/20*451.1  433.5  
  2019 2020
Volumes Hedged (Bcf), as of 10/9/19 405.2* 489.6
*Includes actual settlements of 312.5155.5 Bcf.

CNX's hedged gas volumes include a combination of NYMEX financial hedges, index (NYMEX and basis) financial hedges, and physical fixed price sales. In addition, to protect the NYMEX hedge volumes from basis exposure, CNX enters into basis-only financial hedges and physical sales with fixed basis at certain sales points.



In March 2020, CNX monetized and repriced a portion of its 2022, 2023, and 2024 NYMEX natural gas hedge portfolio generating $55.0 million of net proceeds, which are included in Gain (Loss) on Commodity Derivative Instruments in the Consolidated Statements of Income for the three months ended March 31, 2020. Notional quantities were not affected by the restructuring. 2022 swap contracts with a notional quantity of 113.2 million MMBtus and a weighted average price of $2.80 per MMBtu were repriced to a contract price of $2.40 per MMBtu, 2023 swap contracts with a notional quantity of 51.1 million MMBtus and a weighted average price of $2.69 per MMBtu were repriced to a contract price of $2.48 per MMBtu, and 2024 swap contracts with a notional quantity of 19.2 million MMBtus and a weighted average price of $2.62 per MMBtu were

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repriced to a contract price of $2.54 per MMBtu. The net proceeds from the monetization are expected to be used to reduce the Company’s absolute debt.

In April 2020, CNX monetized and terminated approximately 39 million MMBtus of NYMEX natural gas hedges and a similar quantity of financial basis hedges that were to settle at various times through May to November of 2020. In connection with these monetizations, CNX received $29 million of net proceeds.

Results of Operations - Three Months Ended September 30, 2019March 31, 2020 Compared with Three Months Ended September 30, 2018March 31, 2019

Net IncomeLoss Attributable to CNX Resources Shareholders
CNX reported a net incomeloss attributable to CNX Resources shareholders of $116$329 million, or earningsa loss per diluted share of $0.61,$1.76, for the three months ended September 30, 2019,March 31, 2020, compared to a net incomeloss attributable to CNX Resources shareholders of $125$87 million, or earningsa loss per diluted share of $0.59,$0.44, for the three months ended September 30, 2018.March 31, 2019.
 For the Three Months Ended March 31,
(Dollars in thousands)20202019Variance
Net Loss$(305,222) $(64,651) $(240,571) 
Less: Net Income Attributable to Noncontrolling Interest23,864  22,686  1,178  
Net Loss Attributable to CNX Resources Shareholders$(329,086) $(87,337) $(241,749) 
 For the Three Months Ended September 30,
(Dollars in thousands)2019 2018 Variance
Net Income$143,960
 $146,756
 $(2,796)
Less: Net Income Attributable to Noncontrolling Interest28,422
 21,727
 6,695
Net Income Attributable to CNX Resources Shareholders$115,538
 $125,029
 $(9,491)

CNX consists of two principal business divisions: Exploration and Production (E&P) and Midstream. The operating results of the Company's reportable segments were as follows for the three months ended March 31, 2020 and 2019:
For the Three Months Ended March 31, 2020
(Dollars in millions)E&P DivisionMidstream DivisionIntercompany EliminationsConsolidated
Natural Gas, NGL and Oil Revenue$251  $—  $—  $251  
Gain on Commodity Derivative Instruments115  —  —  115  
Purchased Gas Revenue26  —  —  26  
Midstream Revenue - Related Party—  62  (62) —  
Midstream Revenue - Third Party—  18  —  18  
Other Operating Income6  —  —  6  
Total Revenue and Other Operating Income398  80  (62) 416  
Operating Expense:
   Lease Operating Expense10  —  —  10  
   Transportation, Gathering and Compression133  12  (62) 83  
   Production, Ad Valorem, and Other Fees6  —  —  6  
   Depreciation, Depletion and Amortization119  10  —  129  
Impairment of Exploration and Production Properties62  —  —  62  
Impairment of Goodwill—  473  —  473  
   Exploration and Production Related Other Costs4  —  —  4  
   Purchased Gas Costs25  —  —  25  
   Other Operating Expense21  —  —  21  
   Selling, General and Administrative Costs25  5  —  30  
Total Operating Costs and Expenses405  500  (62) 843  
   Interest Expense40  9  —  49  
Total Division Costs445  509  (62) 892  
Loss Before Income Tax$(47) $(429) $—  $(476) 



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For the Three Months Ended March 31, 2019
(Dollars in millions)E&P DivisionMidstream DivisionIntercompany EliminationsConsolidated
Natural Gas, NGL and Oil Revenue$436  $—  $—  $436  
Loss on Commodity Derivative Instruments(195) —  —  (195) 
Purchased Gas Revenue16  —  —  16  
Midstream Revenue - Related Party—  54  (54) —  
Midstream Revenue - Third Party—  19  —  19  
Other Operating Income3  —  —  3  
Total Revenue and Other Operating Income260  73  (54) 279  
Operating Expense:
   Lease Operating Expense19  —  —  19  
   Transportation, Gathering and Compression122  12  (54) 80  
   Production, Ad Valorem, and Other Fees7  —  —  7  
   Depreciation, Depletion and Amortization117  8  —  125  
   Exploration and Production Related Other Costs3  —  —  3  
   Purchased Gas Costs16  —  —  16  
   Other Operating Expense23  —  —  23  
   Selling, General and Administrative Costs31  6  —  37  
Total Operating Costs and Expenses338  26  (54) 310  
   Interest Expense28  7  —  35  
   Loss on Asset Sales and Abandonments, net—  7  —  7  
Total Division Costs366  40  (54) 352  
(Loss) Earnings Before Income Tax$(106) $33  $—  $(73) 

The principal activity of the E&P Division is to produce pipeline quality natural gas for sale primarily to gas wholesalers. The E&P Division's reportable segments are Marcellus Shale, Utica Shale, Coalbed Methane, and Other Gas.

CNX's E&P Division had earningsa loss before income tax of $151$47 million for the three months ended September 30, 2019,March 31, 2020, compared to earningsa loss before income tax of $54$106 million for the three months ended September 30, 2018.March 31, 2019. Included in the earningsloss for the three months ended September 30, 2019March 31, 2020 was a $62 million non-cash impairment charge related to exploration and 2018 wereproduction properties and an unrealized gainsloss on commodity derivative instruments of $157 million and $15 million, respectively.$36 million. Included in the loss for the three months ended March 31, 2019 was an unrealized loss on commodity derivative instruments of $154 million.

CNX's Midstream Division's principal activity is the ownership, operation, development and acquisition of natural gas gathering and other midstream energy assets, through CNX Gathering and CNXM, which provide natural gas gathering services for the Company's produced gas, as well as for other independent third-parties in the Marcellus Shale and Utica Shale in Pennsylvania and West Virginia. Excluded from the Midstream Division are the gathering assets and operations of CNX that have not been contributed to CNX Gathering and CNXM.

As a result of the Midstream Acquisition (See Note 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q), CNX owns and controls 100% of CNX Gathering, making CNXM a single-sponsor master limited partnership and thus the Company began consolidating CNXM on January 3, 2018. Prior to the acquisition, CNX accounted for its interests in CNX Gathering and CNXM as an equity-method investment.

CNX's Midstream Division had earningsa loss before income tax of $42$429 million for the three months ended September 30, 2019,March 31, 2020, compared to earnings before income tax of $31$33 million for the three months ended September 30, 2018.March 31, 2019.









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E&P Division Summary
Sales volumes, average sales priceprices (including the effects of settled derivative instruments)instruments and excluding monetization), and average costs for the E&P Division were as follows: 
For the Three Months Ended March 31,
20202019VariancePercent Change
Sales Volumes (Bcfe)134.4133.01.40  1.1 %
Average Sales Price - Gas (per Mcf)$1.83  $3.21  $(1.38) (43.0)%
Gain (Loss) on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)*$0.77  $(0.33) $1.10  333.3 %
Average Sales Price - NGL (per Mcfe)**$2.34  $4.46  $(2.12) (47.5)%
Average Sales Price - Oil (per Mcfe)**$7.87  $—  $7.87  — %
Average Sales Price - Condensate (per Mcfe)**$6.28  $6.50  $(0.22) (3.4)%
Average Sales Price (per Mcfe)$2.59  $2.97  $(0.38) (12.8)%
Lease Operating Expense (per Mcfe)0.07  0.14  (0.07) (50.0)%
Production, Ad Valorem, and Other Fees (per Mcfe)0.05  0.05  —  — %
Transportation, Gathering and Compression (per Mcfe)0.99  0.92  0.07  7.6 %
Depreciation, Depletion and Amortization (DD&A) (per Mcfe)0.87  0.88  (0.01) (1.1)%
Average Costs (per Mcfe)$1.98  $1.99  $(0.01) (0.5)%
Average Margin (per Mcfe)$0.61  $0.98  $(0.37) (37.8)%
 For the Three Months Ended September 30,
 2019 2018 Variance 
Percent
Change
Sales Volumes (Bcfe)128.3
 119.0
 9.3
 7.8 %
        
Average Sales Price (per Mcfe)$2.51
 $2.92
 $(0.41) (14.0)%
Lease Operating Expense (per Mcfe)0.11
 0.14
 (0.03) (21.4)%
Production, Ad Valorem, and Other Fees (per Mcfe)0.05
 0.06
 (0.01) (16.7)%
Transportation, Gathering and Compression (per Mcfe)0.97
 0.84
 0.13
 15.5 %
Depreciation, Depletion and Amortization (DD&A) (per Mcfe)0.86
 0.93
 (0.07) (7.5)%
Average Costs (per Mcfe)1.99
 1.97
 0.02
 1.0 %
Average Margin (per Mcfe)$0.52
 $0.95
 $(0.43) (45.3)%


* Excluding gain from hedge monetization

**NGL and Condensate are converted to Mcfe at the rate of one barrel equals six Mcf based upon the approximate relative energy content of oil and natural gas, which is not indicative of the relationship of oil, NGL, condensate, and natural gas prices.


33


Natural gas, NGLs,NGL, and oil revenue was $265$251 million for the three months ended September 30, 2019,March 31, 2020, compared to $345$436 million for the three months ended September 30, 2018.March 31, 2019. The decrease was primarily due to the 12.8% decrease in inthe average sales price driven by lower natural gas and NGL pricing offset, in-part by the 7.8% increase in total sales volumes.prices.

The decrease in average sales price per Mcfe was primarily the result of the $0.67$1.38 per Mcf decrease in general natural gas prices, when excluding the impact of hedging, in the markets in which CNX sells its natural gas. There was also a $0.16$0.03 per Mcfe decrease in the uplift from NGLsNGL and condensate sales volumes.volumes when excluding the impact of hedging. Both decreases were offset, in-part, by a $0.44the $1.10 per Mcf increase in the realized gain (loss) on commodity derivative instruments related to the Company's hedging program during the current period.program.

Changes in the average costs per Mcfe were primarily related to the following items:
•Lease operating expense decreased on a per unit basis primarily due to a decrease in water disposal costs in the period-to-period comparison due to an increase in the reuse of produced water in well completions in the current period.
•Transportation, gathering, and compression expense increased on a per unit basis primarily due to an increase in CNXM gathering fees related to an increase in our Marcellus production and an increase in firm transportation expense, primarily as a result of new contracts that give CNX the ability to move and sell natural gas outside of the Appalachian basin. The decrease in production from CNX's lower cost dry Utica volumes also contributed to the increase on a per unit basis.
Lease operating expense decreased on a per unit basis primarily due to a reduction in the number of employees and the associated costs in the period-to-period comparison.
Depreciation, depletion, and amortization expense decreased on a per unit basis primarily due to a reduction in Marcellus rates as a result of an increase in the Company's associated reserves.









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The following table presents a breakout of net liquid and natural gas sales information and settled derivative information to assist in the understanding of the Company’s natural gas production and sales portfolio.portfolio and information regarding settled commodity derivatives:
For the Three Months Ended March 31,
 in thousands (unless noted)20202019VariancePercent Change
LIQUIDS
NGL:
Sales Volume (MMcfe)8,301  6,681  1,620  24.2 %
Sales Volume (Mbbls)1,383  1,113  270  24.3 %
Gross Price ($/Bbl)$14.04  $26.76  $(12.72) (47.5)%
Gross Revenue$19,412  $29,766  $(10,354) (34.8)%
Oil:
Sales Volume (MMcfe)74  23  51  221.7 %
Sales Volume (Mbbls)12  4  8  200.0 %
Gross Price ($/Bbl)$47.22  $43.56  $3.66  8.4 %
Gross Revenue$582  $166  $416  250.6 %
Condensate:
Sales Volume (MMcfe)303  358  (55) (15.4)%
Sales Volume (Mbbls)50  60  (10) (16.7)%
Gross Price ($/Bbl)$37.68  $39.00  $(1.32) (3.4)%
Gross Revenue$1,901  $2,327  $(426) (18.3)%
GAS
Sales Volume (MMcf)125,685  125,938  (253) (0.2)%
Sales Price ($/Mcf)$1.83  $3.21  $(1.38) (43.0)%
  Gross Revenue$229,599  $403,687  $(174,088) (43.1)%
Hedging Impact ($/Mcf)$0.77  $(0.33) $1.10  (333.3)%
Gain (Loss) on Commodity Derivative Instruments - Cash Settlement*96,179  (41,382) 137,561  (332.4)%
  For the Three Months Ended September 30,
 in thousands (unless noted) 2019 2018 Variance Percent Change
LIQUIDS        
NGLs:        
Sales Volume (MMcfe) 8,019
 9,972
 (1,953) (19.6)%
Sales Volume (Mbbls) 1,337
 1,662
 (325) (19.6)%
Gross Price ($/Bbl) $13.68
 $28.08
 $(14.40) (51.3)%
Gross Revenue $18,305
 $46,663
 $(28,358) (60.8)%
         
Oil:        
Sales Volume (MMcfe) 9
 72
 (63) (87.5)%
Sales Volume (Mbbls) 2
 12
 (10) (83.3)%
Gross Price ($/Bbl) $56.64
 $63.00
 $(6.36) (10.1)%
Gross Revenue $92
 $759
 $(667) (87.9)%
         
Condensate:        
Sales Volume (MMcfe) 67
 351
 (284) (80.9)%
Sales Volume (Mbbls) 11
 58
 (47) (81.0)%
Gross Price ($/Bbl) $75.54
 $58.56
 $16.98
 29.0 %
Gross Revenue $839
 $3,426
 $(2,587) (75.5)%
         
GAS        
Sales Volume (MMcf) 120,208
 108,565
 11,643
 10.7 %
Sales Price ($/Mcf) $2.04
 $2.71
 $(0.67) (24.7)%
  Gross Revenue $245,815
 $293,864
 $(48,049) (16.4)%
         
Hedging Impact ($/Mcf) $0.47
 $0.03
 $0.44
 1,466.7 %
Gain on Commodity Derivative Instruments - Cash Settlement 57,041
 2,825
 54,216
 1,919.2 %
* Excluding gain from hedge monetization









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Selling, General and Administrative (SG&A)("SG&A") - Total Company

SG&A costs include costs such as overhead, including employee labor and benefit costs, short-term incentive compensation, costs of maintaining our headquarters, audit and other professional fees, and legal compliance expenses. SG&A costs also include non-cash long-term equity-based compensation expense.
 For the Three Months Ended March 31,
 (in millions)20202019VariancePercent
Change
SG&A
Long-Term Equity-Based Compensation (Non-Cash)$7  $11  $(4) (36.4)%
Salaries and Wages8  11  (3) (27.3)%
Short-Term Incentive Compensation2  4  (2) (50.0)%
Other13  10  3  30.0 %
Total SG&A$30  $36  $(6) (16.7)%

•Long-term equity-based compensation decreased $4 million in the period-to-period comparison due to the acceleration of vesting of certain restricted stock units and performance share units held by certain employees related to a change in control event that occurred in the second quarter of 2019.
•Salaries and Wages decreased $3 million due to an overall reduction in employee costs.
•Short-term incentive compensation decreased $2 million due to lower projected payouts in the current period.





35
 For the Three Months Ended September 30,
 (in millions)2019 2018 Variance 
Percent
Change
SG&A       
Short-Term Incentive Compensation$2
 $6
 $(4) (66.7)%
Long-Term Equity-Based Compensation (Non-Cash)2
 5
 (3) (60.0)%
Salaries and Wages10
 9
 1
 11.1 %
Other10
 12
 (2) (16.7)%
Total SG&A$24
 $32
 $(8) (25.0)%

•
Short-term incentive compensation decreased $4 million due to lower projected payouts in the current period.

Unallocated Expense

Certain costs and expenses, such as other expense (income), gain on asset sales and abandonments related to non-core assets, (gain) loss on debt extinguishment and income taxes are unallocated expenses and therefore are excluded from the per unit costs above as well as segment reporting. Below is a summary of these costs and expenses:

Other Expense (Income)
 For the Three Months Ended March 31,
 (in millions)20202019VariancePercent
Change
Other Income
Royalty Income$—  $3  $(3) (100.0)%
Right of Way Sales—  1  (1) (100.0)%
Interest Income—  1  (1) (100.0)%
Other2  —  2  100.0 %
Total Other Income$2  $5  $(3) (60.0)%
Other Expense
Professional Services$3  $—  $3  100.0 %
Bank Fees3  3  —  — %
Other Corporate Expense1  1  —  — %
Total Other Expense$7  $4  $3  75.0 %
       Total Other Expense (Income)$5  $(1) $6  600.0 %
 For the Three Months Ended September 30,
 (in millions)2019 2018 Variance 
Percent
Change
Other Income       
Royalty Income$—
 $2
 $(2) (100.0)%
Right of Way Sales—
 1
 (1) (100.0)%
Interest Income1
 —
 1
 100.0 %
Other—
 1
 (1) (100.0)%
Total Other Income$1
 $4
 $(3) (75.0)%
        
Other Expense       
Professional Services$1
 $1
 $—
 — %
Bank Fees3
 3
 —
 — %
Other Corporate Expense—
 1
 (1) (100.0)%
Total Other Expense$4
 $5
 $(1) (20.0)%
        
       Total Other Expense$3
 $1
 $2
 200.0 %

Gain on Asset Sales and Abandonments, net
A gain on asset sales of $3$12 million related to non-core assets was recognized in the three months ended September 30, 2019March 31, 2020 compared to a gain of $134$4 million in the three months ended September 30, 2018, primarily relatedMarch 31, 2019.

Also refer to the Ohio Utica JV asset sale. See Note 5 - Acquisitionsdiscussion of Loss on Asset Sales and DispositionsAbandonmentscontained in the Notes to the Unaudited Consolidated Financial Statements in Item 1 section "Total Midstream Division Analysis"of this Form 10-Q for additional information.items that are not part of Unallocated Expense.

(Gain) Loss on Debt Extinguishment
Loss
A gain on debt extinguishment of $15$11 million was recognized in the three months ended September 30, 2018 dueMarch 31, 2020 compared to a loss on debt extinguishment of $8 million in the $200three months ended March 31, 2019. During the three months ended March 31, 2020, CNX purchased $71 million redemption of the 8.00%its 5.875% Senior notes due in April 20232022 at an average price equal to 106.0%83.9% of the principal amount. No such transactions occurredDuring the three months end March 31, 2019 CNX purchased $400 million of its 5.875% Senior notes due in April 2022 at an average price equal to 101.5% of the current period.principal amount. See Note 119 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.




35


Income Taxes

The effective income tax rate was 25.4%33.3% for the three months ended September 30, 2019March 31, 2020 compared to 27.9%15.2% for the three months ended September 30, 2018.March 31, 2019. The effective rate for the three months ended September 30,March 31, 2020 and 2019 differs from the U.S. federal statutory rate of 21% primarily due to the impact of noncontrolling interest, equity compensation and state income taxes. The effective rate for the three months ended September 30, 2018 differs from the U.S. federal statutory rate of 21% primarily due to the impact of noncontrolling interest, equity compensation, and state income taxes.

See Note 64 - Income Taxes in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
 For the Three Months Ended March 31,
(in millions)20202019VariancePercent
Change
Total Company Loss Before Income Tax$(458) $(76) $(382) 502.6 %
Income Tax Benefit$(153) $(12) $(141) 1,175.0 %
Effective Income Tax Rate33.3 %15.2 %18.1 %
 For the Three Months Ended September 30,
(in millions)2019 2018 Variance 
Percent
Change
Total Company Earnings Before Income Tax$193
 $203
 $(10) (4.9)%
Income Tax Expense$49
 $57
 $(8) (14.0)%
Effective Income Tax Rate25.4% 27.9% (2.5)%  



36


TOTAL E&P DIVISION ANALYSIS for the three months ended September 30, 2019March 31, 2020 compared to the three months ended September 30, 2018:March 31, 2019:
The E&P division had earningsa loss before income tax of $151$47 million for the three months ended September 30, 2019March 31, 2020 compared to earningsa loss before income tax of $54$106 million for the three months ended September 30, 2018.March 31, 2019. Variances by individual E&Poperating segment are discussed below.
For the Three Months EndedDifference to Three Months Ended
 March 31, 2020March 31, 2019
 (in millions)MarcellusUticaCBMOther
Gas		Total E&PMarcellusUticaCBMOther
Gas		Total
E&P
Natural Gas, NGL and Oil Revenue$179  $41  $31  $—  $251  $(114) $(52) $(19) $—  $(185) 
Gain on Commodity Derivative Instruments68  18  10  19  115  95  28  14  173  310  
Purchased Gas Revenue—  —  —  26  26  —  —  —  10  10  
Other Operating Income—  —  —  6  6  —  —  —  3  3  
Total Revenue and Other Operating Income247  59  41  51  398  (19) (24) (5) 186  138  
Lease Operating Expense5  2  4  (1) 10  (4) (3) —  (2) (9) 
Production, Ad Valorem, and Other Fees4  1  1  —  6  —  —  (1) —  (1) 
Transportation, Gathering and Compression115  9  11  (2) 133  11  —  2  (2) 11  
Depreciation, Depletion and Amortization59  36  19  5  119  (3) 1  1  3  2  
Impairment of Exploration and Production Properties
—  —  —  62  62  —  —  —  62  62  
Exploration and Production Related Other Costs—  —  —  4  4  —  —  —  1  1  
Purchased Gas Costs—  —  —  25  25  —  —  —  9  9  
Other Operating Expense—  —  —  21  21  —  —  —  (2) (2) 
Selling, General and Administrative Costs
—  —  —  25  25  —  —  —  (6) (6) 
Total Operating Costs and Expenses183  48  35  139  405  4  (2) 2  63  67  
Interest Expense—  —  —  40  40  —  —  —  12  12  
Total E&P Division Costs183  48  35  179  445  4  (2) 2  75  79  
Earnings (Loss) Before Income Tax$64  $11  $6  $(128) $(47) $(23) $(22) $(7) $111  $59  
 For the Three Months Ended Difference to Three Months Ended
 September 30, 2019 September 30, 2018
 (in millions)Marcellus Utica CBM Other
Gas		 Total E&P Marcellus Utica CBM Other
Gas		 Total
E&P
Natural Gas, NGLs and Oil Revenue$179
 $50
 $36
 $—
 $265
 $(28) $(38) $(12) $(2) $(80)
Gain on Commodity Derivative Instruments38 13
 6
 157
 214
 36
 13
 5
 142
 196
Purchased Gas Revenue—
 —
 —
 29
 29
 —
 —
 —
 18
 18
Other Operating Income—
 —
 —
 4
 4
 —
 —
 —
 1
 1
Total Revenue and Other Operating Income217
 63
 42
 190
 512
 8
 (25) (7) 159
 135
Lease Operating Expense6
 4
 4
 —
 14
 (1) (1) (1) 1
 (2)
Production, Ad Valorem, and Other Fees3
 1
 2
 —
 6
 —
 (1) —
 —
 (1)
Transportation, Gathering and Compression106
 8
 10
 —
 124
 29
 (4) (1) —
 24
Depreciation, Depletion and Amortization61
 32
 17
 2
 112
 3
 4
 (4) (3) —
Exploration and Production Related Other Costs—
 —
 —
 6
 6
 —
 —
 —
 3
 3
Purchased Gas Costs—
 —
 —
 27
 27
 —
 —
 —
 16
 16
Other Operating Expense—
 —
 —
 21
 21
 —
 —
 —
 3
 3
Selling, General and Administrative Costs—
 —
 —
 20
 20
 —
 —
 —
 (7) (7)
Total Operating Costs and Expenses176
 45
 33
 76
 330
 31
 (2) (6) 13
 36
Interest Expense—
 —
 —
 31
 31
 —
 —
 —
 2
 2
Total E&P Division Costs176
 45
 33
 107
 361
 31
 (2) (6) 15
 38
Earnings Before Income Tax$41
 $18
 $9
 $83
 $151
 $(23) $(23) $(1) $144
 $97


Note: Included in the table above is a related party transportation, gathering and compression charge of $62 million that is offset in the Midstream Division in Midstream Revenue - Related Party. Of this charge, $59 million related to Marcellus and $3 million related to Utica. See Note 14 - Segment Information in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-Q for additional information.

37


MARCELLUS SEGMENT
The Marcellus segment had earnings before income tax of $41$64 million for the three months ended September 30, 2019March 31, 2020 compared to earnings before income tax of $64$87 million for the three months ended September 30, 2018.March 31, 2019.
For the Three Months Ended September 30, For the Three Months Ended March 31,
2019 2018 Variance 
Percent
Change
 20202019VariancePercent
Change
Marcellus Gas Sales Volumes (Bcf)79.2
 61.9
 17.3
 27.9 %Marcellus Gas Sales Volumes (Bcf)87.6  81.6  6.0  7.4 %
NGLs Sales Volumes (Bcfe)*8.0
 8.4
 (0.4) (4.8)%
NGL Sales Volumes (Bcfe)*NGL Sales Volumes (Bcfe)*8.3  6.7  1.6  23.9 %
Oil Sales Volumes (Bcfe)*Oil Sales Volumes (Bcfe)*0.1  —  0.1  100.0 %
Condensate Sales Volumes (Bcfe)*0.1
 0.3
 (0.2) (66.7)%Condensate Sales Volumes (Bcfe)*0.3  0.4  (0.1) (25.0)%
Total Marcellus Sales Volumes (Bcfe)*87.3
 70.6
 16.7
 23.7 %Total Marcellus Sales Volumes (Bcfe)*96.3  88.7  7.6  8.6 %
       
Average Sales Price - Gas (per Mcf)$2.02
 $2.66
 $(0.64) (24.1)%Average Sales Price - Gas (per Mcf)$1.80  $3.20  $(1.40) (43.8)%
Gain on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.48
 $0.03
 $0.45
 1,500.0 %
Average Sales Price - NGLs (per Mcfe)*$2.28
 $4.80
 $(2.52) (52.5)%
Gain (Loss) on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)Gain (Loss) on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.78  $(0.34) $1.12  329.4 %
Average Sales Price - NGL (per Mcfe)*Average Sales Price - NGL (per Mcfe)*$2.34  $4.45  $(2.11) (47.4)%
Average Sales Price - Oil (per Mcfe)*Average Sales Price - Oil (per Mcfe)*$7.75  $—  $7.75  100.0 %
Average Sales Price - Condensate (per Mcfe)*$14.09
 $9.66
 $4.43
 45.9 %Average Sales Price - Condensate (per Mcfe)*$6.13  $6.50  $(0.37) (5.7)%
       
Total Average Marcellus Sales Price (per Mcfe)$2.49
 $2.96
 $(0.47) (15.9)%Total Average Marcellus Sales Price (per Mcfe)$2.57  $3.00  $(0.43) (14.3)%
Average Marcellus Lease Operating Expenses (per Mcfe)0.07
 0.10
 (0.03) (30.0)%Average Marcellus Lease Operating Expenses (per Mcfe)0.05  0.11  (0.06) (54.5)%
Average Marcellus Production, Ad Valorem, and Other Fees (per Mcfe)0.04
 0.05
 (0.01) (20.0)%Average Marcellus Production, Ad Valorem, and Other Fees (per Mcfe)0.03  0.05  (0.02) (40.0)%
Average Marcellus Transportation, Gathering and Compression Costs (per Mcfe)1.22
 1.10
 0.12
 10.9 %Average Marcellus Transportation, Gathering and Compression Costs (per Mcfe)1.19  1.17  0.02  1.7 %
Average Marcellus Depreciation, Depletion and Amortization Costs (per Mcfe)0.69
 0.80
 (0.11) (13.8)%Average Marcellus Depreciation, Depletion and Amortization Costs (per Mcfe)0.63  0.69  (0.06) (8.7)%
Total Average Marcellus Costs (per Mcfe)$2.02
 $2.05
 $(0.03) (1.5)% Total Average Marcellus Costs (per Mcfe)$1.90  $2.02  $(0.12) (5.9)%
Average Margin for Marcellus (per Mcfe)$0.47
 $0.91
 $(0.44) (48.4)% Average Margin for Marcellus (per Mcfe)$0.67  $0.98  $(0.31) (31.6)%
* NGLs, Oil and Condensate are converted to Mcfe at the rate of one barrel equals six Mcf based upon the approximate relative energy content of oil and natural gas, which is not indicative of the relationship of oil, NGLs,NGL, condensate, and natural gas prices.

The Marcellus segment had natural gas, NGLsNGL and oil revenue of $179 million for the three months ended September 30, 2019March 31, 2020 compared to $207$293 million for the three months ended September 30, 2018.March 31, 2019. The $28$114 million decrease was due primarily due to the 24.1%a 43.8% decrease in the average sale price for natural gas sales price and the 52.5%a 47.4% decrease in the average NGL salessale price offset in part by the 23.7% increase in total Marcellus sales volumes. The increase in sales volumes was primarily due to additional wells being turned in-line throughout 2018 and the first nine months of 2019 as part of the Company's ongoing drilling and completions program.NGLs.

The decrease in the total average Marcellus sales price was primarily due to a $0.64$1.40 per Mcf decrease in the average gas sales price for natural gas and a $2.52$2.11 per Mcfe decrease in the average NGL sales price, offset in part by a $0.45$1.12 per Mcf increase in the realized gain (loss) on commodity derivative instruments resulting from the Company's hedging program. The notional amounts associated with these financial hedges represented approximately 68.782.5 Bcf of the Company's produced Marcellus gas sales volumes for the three months ended September 30, 2019March 31, 2020 at an average gain of $0.56$0.83 per Mcf. For the three months ended September 30, 2018,March 31, 2019, these financial hedges represented approximately 53.955.3 Bcf at an average gainloss of $0.03$0.50 per Mcf. There was a $0.25 per Mcfe decrease in the uplift from NGLs and condensate sales volumes when excluding the impact of hedging.

Total operating costs and expenses for the Marcellus segment were $176$183 million for the three months ended September 30, 2019March 31, 2020 compared to $145$179 million for the three months ended September 30, 2018.March 31, 2019. The increase in total dollars and decrease in unit costs for the Marcellus segment were due to the following items:

•Marcellus lease operating expense was $6expenses were $5 million for the three months ended September 30, 2019March 31, 2020 compared to $7$9 million for the three months ended September 30, 2018.March 31, 2019. The decrease in total dollars was primarily due to a decrease in water disposal costs in the current period due to an increase in the reuse of produced water in well completions activity. The decrease in unit costs was driven by the decreaseddecrease in total dollars, along with the 23.7%8.6% increase in total Marcellus sales volumes.

•Marcellus production, ad valorem, and other fees were consistent at $3 million for the three months ended September 30, 2019 and September 30, 2018. The decrease in unit costs was driven by the 23.7% increase in total Marcellus sales volumes and the 24.1% decrease in the average gas sales price.



38


•Marcellus transportation, gathering and compression costs were $106$115 million for the three months ended September 30, 2019March 31, 2020 compared to $77$104 million for the three months ended September 30, 2018.March 31, 2019. The increase in total dollars was primarily related to the increase in production which resulted in an increase in both CNX Midstream fees as well as an increase in utilized firm transportation expense. The increase in CNXM fees was due to the annual rate escalation as well as additional compression. The increase in firm transportation total

38

dollars was also related to new contracts that give CNX the abilityhigher gas sales volumes. These increases were offset by lower processing costs due to move and sell natural gas outside of the Appalachian basin.a drier production mix. The increase in unit costs was driven by the increased total dollars described above.
•Depreciation, depletion and amortization costs attributable to the Marcellus segment were $61$59 million for the three months ended September 30, 2019March 31, 2020 compared to $58$62 million for the three months ended September 30, 2018.March 31, 2019. These amounts included depletion on a unit of production basis of $0.68$0.61 per Mcfe and $0.79$0.69 per Mcfe, respectively. The decrease in units of production depreciation, depletion and amortization rate isin the current period are the result of positive reserve revisions within our core development area.area and lower costs reserves added in our core development area from the 2019 development program. The remaining depreciation, depletion and amortization costs were either recorded on a straight-line basis or related to asset retirement obligations.

UTICA SEGMENT

The Utica segment had earnings before income tax of $18$11 million for the three months ended September 30, 2019March 31, 2020 compared to earnings before income tax of $33 million for the three months ended March 31, 2019.
 For the Three Months Ended March 31,
 20202019VariancePercent
Change
Utica Gas Sales Volumes (Bcf)24.8  30.6  (5.8) (19.0)%
Average Sales Price - Gas (per Mcf)$1.67  $3.03  $(1.36) (44.9)%
Gain (Loss) on Commodity Derivative Instruments - Cash Settlement- Gas (per Mcf)$0.73  $(0.31) $1.04  335.5 %
Total Average Utica Sales Price (per Mcfe)$2.40  $2.72  $(0.32) (11.8)%
Average Utica Lease Operating Expenses (per Mcfe)0.07  0.15  (0.08) (53.3)%
Average Utica Production, Ad Valorem, and Other Fees (per Mcfe)0.05  0.04  0.01  25.0 %
Average Utica Transportation, Gathering and Compression Costs (per Mcfe)0.37  0.28  0.09  32.1 %
Average Utica Depreciation, Depletion and Amortization Costs (per Mcfe)1.48  1.17  0.31  26.5 %
   Total Average Utica Costs (per Mcfe)$1.97  $1.64  $0.33  20.1 %
   Average Margin for Utica (per Mcfe)$0.43  $1.08  $(0.65) (60.2)%

The Utica segment had natural gas revenue of $41 million for the three months ended September 30, 2018.
 For the Three Months Ended September 30,
 2019 2018 Variance 
Percent
Change
Utica Gas Sales Volumes (Bcf)26.8
 31.9
 (5.1) (16.0)%
NGLs Sales Volumes (Bcfe)*—
 1.6
 (1.6) (100.0)%
Condensate Sales Volumes (Bcfe)*—
 0.1
 (0.1) (100.0)%
Total Utica Sales Volumes (Bcfe)*26.8
 33.6
 (6.8) (20.2)%
        
Average Sales Price - Gas (per Mcf)$1.86
 $2.53
 $(0.67) (26.5)%
Gain on Commodity Derivative Instruments - Cash Settlement- Gas (per Mcf)$0.47
 $—
 $0.47
 100.0 %
Average Sales Price - NGLs (per Mcfe)*$—
 $4.00
 $(4.00) (100.0)%
Average Sales Price - Condensate (per Mcfe)*$—
 $10.01
 $(10.01) (100.0)%
        
Total Average Utica Sales Price (per Mcfe)$2.34
 $2.62
 $(0.28) (10.7)%
Average Utica Lease Operating Expenses (per Mcfe)0.15
 0.14
 0.01
 7.1 %
Average Utica Production, Ad Valorem, and Other Fees (per Mcfe)0.04
 0.07
 (0.03) (42.9)%
Average Utica Transportation, Gathering and Compression Costs (per Mcfe)0.29
 0.35
 (0.06) (17.1)%
Average Utica Depreciation, Depletion and Amortization Costs (per Mcfe)1.18
 0.83
 0.35
 42.2 %
   Total Average Utica Costs (per Mcfe)$1.66
 $1.39
 $0.27
 19.4 %
   Average Margin for Utica (per Mcfe)$0.68
 $1.23
 $(0.55) (44.7)%

*NGLs and Condensate are convertedMarch 31, 2020 compared to Mcfe at the rate of one barrel equals six Mcf based upon the approximate relative energy content of oil and natural gas, which is not indicative of the relationship of oil, NGLs, condensate, and natural gas prices.

The Utica segment had natural gas, NGLs and oil revenue of $50$93 million for the three months ended September 30, 2019 compared to $88 million for the three months ended September 30, 2018.March 31, 2019. The $38$52 million decrease was primarily due to the 20.2%19.0% decrease in total Utica sales volumes along with the 26.5%and a 44.9% decrease in the average gas sales price.price for natural gas. The decrease in total Utica sales volumes was primarily due to the sale of substantially all of CNX's Ohio Utica JV assets in the third quarter of 2018 as well as normal production declines in the remaining dry Utica wells.

The decrease in total average Utica sales price was primarily due to a $0.67$1.36 per Mcf decrease in the average gas sales price,price. This was offset in part by a $0.47$1.04 per Mcf increase in the realized gain (loss) on commodity derivative instruments. The notional amounts associated with these financial hedges represented approximately 21.621.7 Bcf of the Company's produced Utica gas sales volumes for the three months ended September 30, 2019March 31, 2020 at an average gain of $0.58$0.83 per Mcf. For the three months ended September 30, 2018,March 31, 2019, these financial hedges represented approximately 23.119.6 Bcf at an average gainloss of $0.04$0.49 per Mcf. Additionally, there was a $0.08 per


39


Mcfe decrease in the uplift from NGLs and condensate sales volumes when excluding the impact of hedging due to the sale of the previously-mentioned JV assets in the third quarter of 2018, which consisted primarily of wet gas production.

Total operating costs and expenses for the Utica segment were $45$48 million for the three months ended September 30, 2019March 31, 2020 compared to $47$50 million for the three months ended September 30, 2018.March 31, 2019. The decrease in total dollars and increase in unit costs for the Utica segment were due to the following items:

•Utica lease operating expense was $4$2 million for the three months ended September 30, 2019March 31, 2020 compared to $5 million for the three months ended September 30, 2018.March 31, 2019. The decrease in total dollars was primarily due to a decrease in water disposal costs due to lower production volumes, an increase in reuse of produced water in well completions and a reduction in repairs and maintenancewell operating costs due to the sale of the Ohio JV assetsoverall decrease in 2018, along with a reduction in the number of employees and the associated costs in the period-to-period comparison.Utica volumes. The increasedecrease in unit costs was driven by the decrease in production volumes.total dollars.

•Utica transportation, gathering and compression costs were $8remained consistent at $9 million for both the three months ended September 30, 2019 compared to $12 million for the three months ended September 30, 2018.March 31, 2020 and 2019. The $4 million decrease in total dollars and $0.06$0.09 per Mcfe decreaseincrease in unit costs were both due towas driven by the overall decrease in Utica volumes as well as the shift to lower cost dry Utica production.volumes.


39

•Depreciation, depletion and amortization costs attributable to the Utica segment were $32$36 million for the three months ended September 30, 2019March 31, 2020 compared to $28$35 million for the three months ended September 30, 2018.March 31, 2019. These amounts included depletion on a unit of production basis of $1.17$1.49 per Mcfe and $0.83$1.17 per Mcfe, respectively. The increase in the units of production depreciation, depletion and amortization rate was due to negative reserve revisions an increase in capital expendituresthe current period and a higher depreciation, depletion and amortization rate on deep dry Utica wells compared tocost reserves added from the lower capital cost Utica wells which were part of the Ohio JV asset sale in 2018.2019 development program. The remaining depreciation, depletion and amortization costs were either recorded on a straight-line basis or related to asset retirement obligations.

COALBED METHANE (CBM) SEGMENT
The CBM segment had earnings before income tax of $9$6 million for the three months ended September 30, 2019March 31, 2020 compared to earnings before income tax of $10$13 million for the three months ended September 30, 2018.March 31, 2019.
 For the Three Months Ended March 31,
 20202019VariancePercent
Change
CBM Gas Sales Volumes (Bcf)13.2  13.7  (0.5) (3.6)%
Average Sales Price - Gas (per Mcf)$2.32  $3.64  $(1.32) (36.3)%
Gain (Loss) on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.73  $(0.31) $1.04  335.5 %
Total Average CBM Sales Price (per Mcf)$3.05  $3.32  $(0.27) (8.1)%
Average CBM Lease Operating Expenses (per Mcf)0.27  0.31  (0.04) (12.9)%
Average CBM Production, Ad Valorem, and Other Fees (per Mcf)0.11  0.14  (0.03) (21.4)%
Average CBM Transportation, Gathering and Compression Costs (per Mcf)0.82  0.69  0.13  18.8 %
Average CBM Depreciation, Depletion and Amortization Costs (per Mcf)1.38  1.24  0.14  11.3 %
   Total Average CBM Costs (per Mcf)$2.58  $2.38  $0.20  8.4 %
   Average Margin for CBM (per Mcf)$0.47  $0.94  $(0.47) (50.0)%
 For the Three Months Ended September 30,
 2019 2018 Variance 
Percent
Change
CBM Gas Sales Volumes (Bcf)14.1
 14.7
 (0.6) (4.1)%
        
Average Sales Price - Gas (per Mcf)$2.52
 $3.29
 $(0.77) (23.4)%
Gain on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.43
 $0.04
 $0.39
 975.0 %
        
Total Average CBM Sales Price (per Mcf)$2.95
 $3.33
 $(0.38) (11.4)%
Average CBM Lease Operating Expenses (per Mcf)0.28
 0.32
 (0.04) (12.5)%
Average CBM Production, Ad Valorem, and Other Fees (per Mcf)0.10
 0.12
 (0.02) (16.7)%
Average CBM Transportation, Gathering and Compression Costs (per Mcf)0.71
 0.77
 (0.06) (7.8)%
Average CBM Depreciation, Depletion and Amortization Costs (per Mcf)1.24
 1.47
 (0.23) (15.6)%
   Total Average CBM Costs (per Mcf)$2.33
 $2.68
 $(0.35) (13.1)%
   Average Margin for CBM (per Mcf)$0.62
 $0.65
 $(0.03) (4.6)%

The CBM segment had natural gas revenue of $36$31 million for the three months ended September 30, 2019March 31, 2020 compared to $48$50 million for the three months ended September 30, 2018.March 31, 2019. The $12$19 million decrease was primarily due to the 4.1%3.6% decrease in total CBM sales volumes and the 23.4%36.3% decrease in the average gas sales price.price for natural gas. The decrease in CBM sales volumes was primarily due to normal well declines.

The total average CBM sales price decreased $0.38$0.27 per Mcf due to a $0.77$1.32 per Mcf decrease in the average gas sales price, offset in part by a $0.39$1.04 per Mcf increase in the gain (loss) on commodity derivative instruments resulting from the Company's hedging program. The notional amounts associated with these financial hedges represented approximately 11.311.7 Bcf of the Company's produced CBM sales volumes for the three months ended September 30, 2019March 31, 2020 at an average gain of $0.53$0.83 per Mcf. For the three months ended September 30, 2018,March 31, 2019, these financial hedges represented approximately 11.78.8 Bcf at an average gainloss of $0.03$0.49 per Mcf.


40



Total operating costs and expenses for the CBM segment were $35 million for the three months ended March 31, 2020 compared to $33 million for the three months ended September 30, 2019 compared to $39 million for the three months ended September 30, 2018.March 31, 2019. The decreaseincrease in total dollars and decreaseincrease in unit costs for the CBM segment were due to the following items:

•CBM lease operating expense was $4 million for the three months ended September 30, 2019 compared to $5 million for the three months ended September 30, 2018. The $1 million decrease was primarily due to reductions in contractor services and a decrease in repairs and maintenance costs. The decrease in unit costs was also due to the decrease in total dollars.

•CBM transportation, gathering and compression costs were $10 million for the three months ended September 30, 2019 compared to $11 million for the three months ended September 30, 2018.March 31, 2020 compared to $9 million for the three months ended March 31, 2019. The $1$2 million decreaseincrease in total dollars as well as the $0.06$0.13 per Mcf decreaseincrease in unit costs were primarily related to a decreaseincreases in electrical power expense, as well as a decrease in contractor services.measurement and non-routine repairs.

•Depreciation, depletion and amortization costs attributable to the CBM segment were $17at $19 million for the three months ended September 30, 2019March 31, 2020 compared to $21$18 million for the three months ended September 30, 2018.March 31, 2019. These amounts included depletion on a unit of production basis of $0.68$0.72 per Mcfe and $0.70 per Mcfe, respectively. The increase in the units of production depreciation, depletion and amortization rate was due to negative reserve revisions. The remaining depreciation, depletion and amortization costs were either recorded on a straight-line basis or related to asset retirement obligations.


40


OTHER GAS SEGMENT

The Other Gas segment had earningsa loss before income tax of $83$128 million for the three months ended September 30, 2019March 31, 2020 compared to a loss before income tax of $61$239 million for the three months ended September 30, 2018.March 31, 2019.
 For the Three Months Ended March 31,
 20202019VariancePercent
Change
Other Gas Sales Volumes (Bcf)0.1  —  0.1  100.0 %
 For the Three Months Ended September 30,
 2019 2018 Variance Percent
Change
Other Gas Sales Volumes (Bcf)0.1
 —
 0.1
 100.0 %
Oil Sales Volumes (Bcfe)*—
 0.1
 (0.1) (100.0)%
Total Other Sales Volumes (Bcfe)*0.1
 0.1
 —
 — %

*Oil is converted to Mcfe at the rate of one barrel equals six Mcf based upon the approximate relative energy content of oil and natural gas, which is not indicative of the relationship of oil and natural gas prices.

The Other Gas segment includes activity not assigned to the Marcellus, Utica, or CBM segments. This segment also includes purchased gas activity, unrealized gain or loss on commodity derivative instruments, realized gain on commodity derivative instruments that were partially monetized prior to their settlement dates, purchased gas activity, exploration and production related other costs and other operational activity not assigned to a specific segment.

Other Gas sales volumes are primarily related to shallow oil and gas production. CNX sold substantially all of these assets on March 30, 2018 (See Note 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information). There was nominal natural gas and oil revenue related to the Other Gas segment for both the three months ended September 30, 2019March 31, 2020 and 2018.March 31, 2019. Total operating costs and expenses related to these other gas sales volumes were $2nominal for the three months ended March 31, 2020 compared to $3 million for the three months ended September 30, 2019 compared to $4 million forMarch 31, 2019.

Gain or Loss on Commodity Derivative Instruments and Monetization

For the three months ended September 30, 2018.

TheMarch 31, 2020, the Other Gas segment recognized an unrealized gainloss on commodity derivative instruments of $157$36 million as well as cash settlements received of $55 million for commodity derivative instruments that were partially monetized prior to their settlement dates. For the three months ended September 30,March 31, 2019, compared to $15 million for the three months ended September 30, 2018.Other Gas segment recognized an unrealized loss on commodity derivative instruments of $154 million. The unrealized gainloss on commodity derivative instruments represents changes in the fair value of all of the Company's existing commodity hedges on a mark-to-market basis.

In March 2020, CNX monetized and repriced a portion of its 2022, 2023, and 2024 NYMEX natural gas hedge portfolio resulting in $55 million of net proceeds for the three months ended March 31, 2020. Notional quantities were not affected by the restructuring. 2022 swap contracts with a notional quantity of 113.2 million MMBtu and a weighted average price of $2.80 per MMBtu were repriced to a contract price of $2.40 per MMBtu, 2023 swap contracts with a notional quantity of 51.1 million MMBtu and a weighted average price of $2.69 per MMBtu were repriced to a contract price of $2.48 per MMBtu, and 2024 swap contracts with a notional quantity of 19.2 million MMBtu and a weighted average price of $2.62 per MMBtu were repriced to a contract price of $2.54 per MMBtu. The net proceeds from the monetization are expected to be used to reduce the Company's absolute debt.

Purchased Gas

Purchased gas volumes represent volumes of gas purchased at market prices from third-parties and then resold in order to fulfill contracts with certain customers and to balance supply. Purchased gas revenues were $29$26 million for the three months ended September 30, 2019March 31, 2020 compared to $11$16 million for the three months ended September 30, 2018.March 31, 2019. Purchased gas costs were $27$25 million for the three months ended September 30, 2019March 31, 2020 compared to $11$16 million for the three months ended September 30, 2018.March 31, 2019. The period-to-period increase in purchased gas revenue was due to thean increase in purchased gas sales volumes, offset in part by a decrease in the averageaverages sales price.
 For the Three Months Ended March 31,
 20202019VariancePercent
Change
Purchased Gas Sales Volumes (in Bcf)14.4  5.4  9.0  166.7 %
Average Sales Price (per Mcf)$1.83  $3.00  $(1.17) (39.0)%
Average Cost (per Mcf)$1.74  $3.00  $(1.26) (42.0)%








41


 For the Three Months Ended September 30,
 2019 2018 Variance Percent
Change
Purchased Gas Sales Volumes (in Bcf)13.6
 4.1
 9.5
 231.7 %
Average Sales Price (per Mcf)$2.14
 $2.55
 $(0.41) (16.1)%
Average Cost (per Mcf)$2.02
 $2.56
 $(0.54) (21.1)%

Other Operating Income

Other operating income was $4$6 million for the three months ended September 30, 2019March 31, 2020 compared to $3 million for the three months ended September 30, 2018.March 31, 2019. The $3 million increase was due to the following items:
For the Three Months Ended March 31,
(in millions)20202019VariancePercent
Change
Water Income$2  $—  $2  100.0 %
Gathering Income3  3  —  — %
Other1  —  1  100.0 %
Total Other Operating Income$6  $3  $3  100.0 %

•Water income increased $2 million due to increased sales of freshwater to third-parties for hydraulic fracturing in the 2020 period.

Impairment of Exploration and Production Properties

During the three months ended March 31, 2020, CNX recognized certain indicators of impairments specific to our Southwest Pennsylvania (SWPA) CBM asset group and determined that carrying value of that asset group was not recoverable. The fair value of the asset group was estimated by discounting the estimated future cash flows using discount rates and other assumptions that market participants would use in their estimates of fair value. As a result, an impairment of $62 million was recognized and is included in Impairment of Exploration and Production Properties in the Consolidated Statements of Income. The impairment was related to an economic decision to temporarily idle certain wells and the related processing facility during the quarter.

Exploration and Production Related Other Costs

Exploration and production related other costs were $4 million for the three months ended March 31, 2020 compared to $3 million for the three months ended March 31, 2019. The $1 million increase was due to the following items:
 For the Three Months Ended March 31,
(in millions)20202019VariancePercent
Change
Lease Expiration Costs$2  $2  $—  — %
Land Rentals1  1  —  — %
Other1  —  1  100.0 %
Total Exploration and Production Other Costs$4  $3  $1  33.3 %
 For the Three Months Ended September 30,
(in millions)2019 2018 Variance Percent
Change
Equity in Earnings of Affiliates$1
 $1
 $—
 —%
Gathering Income2
 2
 —
 —%
Other1
 —
 1
 100.0%
Total Other Operating Income$4
 $3
 $1
 33.3%

Exploration and Production Related Other Costs

Exploration and production related other costs were $6 million for the three months ended September 30, 2019 compared to $3 million for the three months ended September 30, 2018. The $3 million increase was due to the following items:
 For the Three Months Ended September 30,
(in millions)2019 2018 Variance 
Percent
Change
Seismic Activity$5
 $—
 $5
 100.0 %
Lease Expiration Costs1
 1
 —
 — %
Land Rentals—
 1
 (1) (100.0)%
Other—
 1
 (1) (100.0)%
Total Exploration and Production Other Costs$6
 $3
 $3
 100.0 %

Seismic activity increased in the period-to-period comparison due to additional geophysical research in the current period related to the Utica segment.

Other Operating Expense

Other operating expense was $21 million for the three months ended September 30, 2019March 31, 2020 compared to $18$23 million for the three months ended September 30, 2018.March 31, 2019. The $3$2 million increasedecrease was due to the following items:
 For the Three Months Ended March 31,
 20202019VariancePercent
Change
Unutilized Firm Transportation and Processing Fees$13  $13  $—  — %
Idle Equipment and Service Charges3  5  (2) (40.0)%
Insurance Expense1  1  —  — %
Other4  4  —  — %
Total Other Operating Expense$21  $23  $(2) (8.7)%
 For the Three Months Ended September 30,
 2019 2018 Variance Percent
Change
Unutilized Firm Transportation and Processing Fees$15
 $11
 $4
 36.4 %
Insurance Expense1
 —
 1
 100.0 %
Consulting and Professional Services—
 1
 (1) (100.0)%
Litigation Expense—
 2
 (2) (100.0)%
Other5
 4
 1
 25.0 %
Total Other Operating Expense$21
 $18
 $3
 16.7 %

Unutilized Firm Transportation and Processing Fees represent pipeline transportation capacity obtained to enable gas production to flow uninterrupted as sales volumes increase, as well as additional processing capacity for NGLs. The increase in the period-to-period comparison was primarily due to previously-acquired capacity which was not utilized during the current period to transport the Company’s flowing production. The Company attempts to minimize this expense by releasing (selling) unutilized firm transportation capacity to other parties when possible and when beneficial. The


42


revenue received when this capacity is released (sold) is included in Gathering Income in Total Other Operating Income above.

Selling, General and Administrative

SG&A costs represent direct charges for the management and operation of CNX's E&P division. SG&A costs were $20$25 million for the three months ended September 30, 2019March 31, 2020 compared to $27$31 million for the three months ended September 30, 2018.March 31, 2019. Refer to the discussion of total company SG&A costs contained in the section "Net IncomeLoss Attributable to CNX Resources Shareholders" of this Form 10-Q for a detailed cost explanation.


42


Interest Expense
        
Interest expense of $31$40 million was recognized in the three months ended September 30, 2019March 31, 2020 compared to $29$28 million in the three months ended September 30, 2018.March 31, 2019. The $2$12 million increase was primarily due to additionalan unrealized loss on interest rate swap agreements during the three months ended March 31, 2020 and the addition of $500 million of 7.25% senior notes due March 2027 during the three months ended March 31, 2019. These increases were offset in part by the purchase of $400 million of the outstanding 5.875% senior notes due in April 2022 throughout 2019, as well as lower borrowings on the CNX credit facility, offset, in part, by the reduction in higher-cost long-term debt resulting from the $500 million purchase, in the 2018 period, of the outstanding 8.00% senior notes due in April 2023, $200 million of which was purchased during the three months ended September 30, 2018.facility. See Note 119 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

TOTAL MIDSTREAM DIVISION ANALYSIS for the three months ended September 30, 2019March 31, 2020 compared to the three months ended September 30, 2018:March 31, 2019:

CNX's Midstream Division's principal activity is the ownership, operation, development and acquisition of natural gas gathering and other midstream energy assets of CNX Gathering and CNXM, which provide natural gas gathering services for the Company's produced gas, as well as for other independent third-parties in the Marcellus Shale and Utica Shale in Pennsylvania and West Virginia. Excluded from the Midstream Division are the gathering assets and operations of CNX that have not been contributed to CNX Gathering and CNXM.

On January 3, 2018, CNX completed the Midstream Acquisition (See Note 5 - Acquisitions and Dispositions in the NotesPrior to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information).IDR Elimination Transaction, CNX Gathering holdsheld all of the interests in CNX Midstream GP LLC, which holdsheld both the general partner interest and incentive distribution rightslimited partner interests in CNXM. As a result of this transaction,Subsequent to the IDR Elimination Transaction, CNX owns and controls 100% of CNX Gathering LLC, making CNXM a single-sponsor master limited partnership and thus the Company began consolidating CNXM on January 3, 2018.consolidates CNXM.
For the Three Months Ended March 31,
 (in millions)20202019Variance
Midstream Revenue - Related Party$62  $54  $8  
Midstream Revenue - Third Party18  19  (1) 
Total Revenue$80  $73  $7  
Transportation, Gathering and Compression$12  $12  $—  
Depreciation, Depletion and Amortization10  8  2  
Impairment of Goodwill473  —  473  
Selling, General, and Administrative Costs
5  6  (1) 
Total Operating Costs and Expenses500  26  474  
Loss on Asset Sales and Abandonments, net—  7  (7) 
Interest Expense9  7  2  
Total Midstream Division Costs509  40  469  
(Loss) Earnings Before Income Tax$(429) $33  $(462) 
 For the Three Months Ended September 30,
 (in millions)

2019 2018 Variance
Midstream Revenue - Related Party$56
 $41
 $15
Midstream Revenue - Third Party19
 20
 (1)
Total Revenue$75
 $61
 $14
      
Transportation, Gathering and Compression$12
 $10
 $2
Depreciation, Depletion and Amortization9
 8
 1
Selling, General, and Administrative Costs
4
 5
 (1)
Total Operating Costs and Expenses25
 23
 2
Interest Expense8
 7
 1
Total Midstream Division Costs33
 30
 3
Earnings Before Income Tax$42
 $31
 $11

Midstream Revenue

Midstream revenue consists of revenue related to volumes gathered on behalf of CNX and other third-party natural gas producers. CNXM charges a higher fee for natural gas that is shipped on its wet system compared to gas shipped through its dry system. CNXM revenue can also be impacted by the relative mix of gathered volumes by area, which may vary depending upon delivery point and may change dynamically depending on commodity prices at time of shipment. Total Midstream revenue increased $7 million primarily due to a 32.6% increase in gathered volumes of dry gas in the period-to-period comparison.


43


The table below summarizes volumes gathered by gas type:
For the Three Months Ended March 31,
20202019Variance
Dry Gas (BBtu/d) (*)1,106  839  267  
Wet Gas (BBtu/d) (*)597  700  (103) 
Other (BBtu/d) (*)(**)299  134  165  
Total Gathered Volumes2,002  1,673  329  

43
 For the Three Months Ended September 30,
 2019 2018 Variance
Dry Gas (BBtu/d) (*)857
 702
 155
Wet Gas (BBtu/d) (*)685
 705
 (20)
Other (BBtu/d) (*)(**)273
 3
 270
Total Gathered Volumes1,815
 1,410
 405

(*) Classification as dry or wet is based upon the shipping destination of the related volumes. Because CNXM's customers have the option to ship a portion of their natural gas to destinations associated with either our wet system or our dry system, due to any number of factors, volumes may be classified as “wet” in one period and as “dry” in the comparative period.
(**) Includes condensate handling and third-party volumes under high-pressure short-haul agreements.

Transportation, Gathering and Compression 

Transportation, Gathering and Compression costs were $12 million for both the three months ended September 30,March 31, 2020 and March 31, 2019, compared to $10 million for the three months ended September 30, 2018, and are comprised of items directly related to the cost of gathering natural gas at the wellhead and transporting it to interstate pipelines or other local sales points. These costs include items such as electrically-powered compression, compressor rental, repairs and maintenance, supplies, treating and contract services.

Selling, General and Administrative Expense    

SG&A expense is comprised of direct charges for the management and operation of CNXM assets. SG&A costs were $4 million for the three months ended September 30, 2019 compared to $5 million for the three months ended September 30, 2018.March 31, 2020 compared to $6 million for the three months ended March 31, 2019. Refer to the discussion of total Company SG&A costs contained in the section "Net IncomeLoss Attributable to CNX Resources Shareholders" of this Form 10-Q for a detailed cost explanation.

Depreciation, Depletion and Amortization Expense   
 
Depreciation expense is recognized on gathering and other equipment on a straight-line basis, with useful lives ranging from 25 years to 40 years.

Interest Expense
Interest expense is comprisedImpairment of interest on the outstanding balance under CNXM's senior notes due 2026 and its revolving credit facility. Interest expense was $8 million for the three months ended September 30, 2019 compared to $7 million for the three months ended September 30, 2018.



44

Goodwill
Results
In connection with the Midstream Acquisition that closed on January 3, 2018, CNX recorded $796 million of Operations - goodwill.

Goodwill is tested for impairment annually during the fourth quarter, or more frequently if recent events or prevailing conditions indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount using the qualitative assessment, a quantitative impairment test is performed. From time to time, CNX may also bypass the qualitative assessment and proceed directly to the quantitative impairment test.
Nine Months Ended September 30, 2019 Compared
In connection with Nine Months Ended September 30, 2018
Net Income AttributableCNX's assessment of goodwill in the first quarter of 2020 in relation to the deteriorating macroeconomic conditions, and the decline in the observable market value of CNXM securities both in relation to the COVID-19 pandemic and the overall decline in the MLP market space, CNX Resources Shareholders
CNX reported net income attributable to CNX Resources shareholders of $191 million, or earnings per diluted share of $1.01, forbypassed the nine months ended September 30, 2019, compared to net income attributable to CNX Resources shareholders of $695 million, or earnings per diluted share of $3.18, for the nine months ended September 30, 2018.
 For the Nine Months Ended September 30,
(Dollars in thousands)2019 2018 Variance
Net Income$272,004
 $753,696
 $(481,692)
Less: Net Income Attributable to Noncontrolling Interest81,325
 59,090
 22,235
Net Income Attributable to CNX Resources Shareholders$190,679
 $694,606
 $(503,927)

CNX consists of two principal business divisions: Explorationqualitative assessment and Production (E&P) and Midstream.

The principal activityperformed a quantitative test that utilized a combination of the E&P Division isincome and market approaches to produce pipeline quality natural gas for sale primarily to gas wholesalers. The E&P Division's reportable segments are Marcellus Shale, Utica Shale, Coalbed Methane, and Other Gas.

CNX's E&P Division had earnings before income taxestimate the fair value of $233 million for the nine months ended September 30, 2019, compared to earnings before income tax of $196 million for the nine months ended September 30, 2018. Included in the earnings for the nine months ended September 30, 2019 and 2018 were unrealized gains on commodity derivative instruments of $214 million and $76 million, respectively.

CNX's Midstream Division's principal activity is the ownership, operation, development and acquisition of natural gas gathering and other midstream energy assets, through CNX Gathering and CNXM, which provide natural gas gathering services for the Company's produced gas, as well as for other independent third-parties in the Marcellus Shale and Utica Shale in Pennsylvania and West Virginia. Excluded from the Midstream Division are the gathering assets and operations of CNX that have not been contributed to CNX Gathering and CNXM.

reporting unit. As a result of this assessment, CNX concluded that the Midstream Acquisition (See Note 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q), CNX owns and controls 100% of CNX Gathering, making CNXM a single-sponsor master limited partnership and thus the Company began consolidating CNXM on January 3, 2018. The resulting gain on remeasurement tocarrying value exceed its estimated fair value, and as a result, an impairment of the previously held equity interest in CNX Gathering and CNXM of $624$473 million was included in the Gain on Previously Held Equity Interest lineImpairment of Goodwill in the Consolidated StatementsStatement of Income in the 2018 period and was part of CNX's unallocated expenses.Income. No such transactions occurred in the currentprior period. Prior to the acquisition, CNX accounted for its interests in CNX Gathering and CNXM as an equity-method investment.

CNX's Midstream Division had earnings before income tax of $119 million for the nine months ended September 30, 2019, compared to earnings before income tax of $95 million for the period from January 3, 2018 through September 30, 2018.
E&P Division Summary
Sales volumes, average sales price (including the effects of settled derivative instruments), and average costs for the E&P Division were as follows: 
 For the Nine Months Ended September 30,
 2019 2018 Variance 
Percent
Change
Sales Volumes (Bcfe)395.8
 371.0
 24.8
 6.7 %
        
Average Sales Price (per Mcfe)$2.70
 $2.93
 $(0.23) (7.8)%
Lease Operating Expense (per Mcfe)0.13
 0.21
 (0.08) (38.1)%
Production, Ad Valorem, and Other Fees (per Mcfe)0.05
 0.07
 (0.02) (28.6)%
Transportation, Gathering and Compression (per Mcfe)0.96
 0.84
 0.12
 14.3 %
Depreciation, Depletion and Amortization (DD&A) (per Mcfe)0.87
 0.90
 (0.03) (3.3)%
Average Costs (per Mcfe)2.01
 2.02
 (0.01) (0.5)%
Average Margin (per Mcfe)$0.69
 $0.91
 $(0.22) (24.2)%


45

Excluding the effects of settled derivative instruments, natural gas, NGLs, and oil revenue was $1,044 million for the nine months ended September 30, 2019, compared to $1,085 million for the nine months ended September 30, 2018. The decrease was primarily due to a decrease in natural gas and NGL pricing, offset in-part by a 6.7% increase in total sales volumes.

The decrease in average sales price per Mcfe was the result of the $0.15 per Mcf decrease in general natural gas prices, when excluding the impact of hedging, in the markets in which CNX sells its natural gas. There was also a $0.13 per Mcfe decrease in the uplift from NGLs and condensate sales volumes. Both decreases were offset, in-part by the $0.06 per Mcf increase in the realized gain on commodity derivative instruments related to the Company's hedging program during the current period.

Changes in the average costs per Mcfe were primarily related to the following items:
Lease operating expense decreased on a per unit basis primarily due to a decrease in water disposal costs in the period-to-period comparison due to an increase in the reuse of produced water in well completions in the current period, and also due to the sale of the majority of CNX's shallow oil and gas assets and the sale of substantially all of CNX's Ohio Utica JV assets in 2018.
Transportation, gathering, and compression expense increased on a per unit basis primarily due to an increase in CNXM gathering fees related to an increase in our Marcellus production and an increase in firm transportation expense, primarily as a result of new contracts that give CNX the ability to move and sell natural gas outside of the Appalachian basin. The decrease in production from CNX's lower cost dry Utica volumes as well as the third quarter 2018 sale of CNX's Ohio JV assets also contributed to the increase on a per unit basis.

The following table presents a breakout of net liquid and natural gas sales information to assist in the understanding of the Company’s natural gas production and sales portfolio.
  For the Nine Months Ended September 30,
 in thousands (unless noted) 2019 2018 Variance Percent Change
LIQUIDS        
NGLs:        
Sales Volume (MMcfe) 22,556
 29,445
 (6,889) (23.4)%
Sales Volume (Mbbls) 3,759
 4,908
 (1,149) (23.4)%
Gross Price ($/Bbl) $19.20
 $27.96
 $(8.76) (31.3)%
Gross Revenue $72,095
 $137,104
 $(65,009) (47.4)%
         
Oil:        
Sales Volume (MMcfe) 43
 236
 (193) (81.8)%
Sales Volume (Mbbls) 7
 39
 (32) (82.1)%
Gross Price ($/Bbl) $48.24
 $58.98
 $(10.74) (18.2)%
Gross Revenue $347
 $2,317
 $(1,970) (85.0)%
         
Condensate:        
Sales Volume (MMcfe) 647
 1,670
 (1,023) (61.3)%
Sales Volume (Mbbls) 108
 278
 (170) (61.2)%
Gross Price ($/Bbl) $44.94
 $53.64
 $(8.70) (16.2)%
Gross Revenue $4,846
 $14,925
 $(10,079) (67.5)%
         
GAS        
Sales Volume (MMcf) 372,524
 339,679
 32,845
 9.7 %
Sales Price ($/Mcf) $2.59
 $2.74
 $(0.15) (5.5)%
  Gross Revenue $966,574
 $930,505
 $36,069
 3.9 %
         
Hedging Impact ($/Mcf) $0.07
 $0.01
 $0.06
 600.0 %
Gain on Commodity Derivative Instruments - Cash Settlement 26,331
 2,518
 23,813
 945.7 %

Selling, General and Administrative (SG&A) - Total Company

SG&A costs include costs such as overhead, including employee labor and benefit costs, short-term incentive compensation, costs of maintaining our headquarters, audit and other professional fees, and legal compliance expenses. SG&A costs also include non-cash long-term equity-based compensation expense.


46

 For the Nine Months Ended September 30,
 (in millions)2019 2018 Variance 
Percent
Change
SG&A       
Long-Term Equity-Based Compensation (Non-Cash)$37
 $16
 $21
 131.3 %
Salaries and Wages31
 30
 1
 3.3 %
Short-Term Incentive Compensation9
 17
 (8) (47.1)%
Other32
 36
 (4) (11.1)%
Total SG&A$109
 $99
 $10
 10.1 %

Long-term equity-based compensation increased $21 million in the period-to-period comparison due to the Company incurring an additional $20 million of long-term equity-based compensation (non-cash) expense during the nine months ended September 30, 2019. The additional expense was a result of the acceleration of vesting of certain restricted stock units and performance share units held by certain employees related to a change in control event (See Note 2 - Earnings Per Share in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information). 
Short-term incentive compensation decreased $8 million due to lower projected payouts in the current period.

Unallocated Expense

Certain costs and expenses, such as other expense (income), gain on asset sales and abandonments related to non-core assets, gain on previously held equity interest, loss on debt extinguishment, impairment of other intangible assets and income taxes are unallocated expenses and therefore are excluded from the per unit costs above as well as segment reporting. Below is a summary of these costs and expenses:

Other Expense (Income)
 For the Nine Months Ended September 30,
 (in millions)2019 2018 Variance 
Percent
Change
Other Income       
Royalty Income$4
 $12
 $(8) (66.7)%
Right of Way Sales4
 5
 (1) (20.0)%
Interest Income2
 —
 2
 100.0 %
Other—
 5
 (5) (100.0)%
Total Other Income$10
 $22
 $(12) (54.5)%
        
Other Expense       
Professional Services$2
 $6
 $(4) (66.7)%
Bank Fees9
 8
 1
 12.5 %
Other Corporate Expense2
 3
 (1) (33.3)%
Total Other Expense$13
 $17
 $(4) (23.5)%
        
       Total Other Expense (Income)$3
 $(5) $8
 (160.0)%

Gain on Asset Sales and Abandonments
A gain on asset sales of $8 million related to non-core assets was recognized in the nine months ended September 30, 2019 compared to a gain of $147 million in the nine months ended September 30, 2018, primarily due to the sale of substantially all of CNX's Ohio Utica JV assets. See Note 56 - AcquisitionsGoodwill and DispositionsOther Intangible Assets in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

Also refer to the discussion of Loss (Gain) on Asset Sales and Abandonments, net
contained in the section "Total Midstream Division Analysis"of this Form 10-Q for additional items that are not part of Unallocated Expense.






47

Gain on Previously Held Equity Interest

CNX recognized a gain on previously held equity interest of $624 million in the nine months ended September 30, 2018 dueCNXM continues to the Midstream Acquisition in January 2018. No such transactions occurred in the current period. See Note 5 - Acquisitionsevaluate projects as CNX's and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

Loss on Debt Extinguishment

Loss on debt extinguishment of $8 million was recognized in the nine months ended September 30, 2019 compared to a loss on debt extinguishment of $54 million in the nine months ended September 30, 2018. During the nine months ended September 30, 2019, CNX purchased $400 million of its 5.875% Senior notes due in April 2022 at an average price equal to 101.5% of the principal amount. During the nine months end September 30, 2018 CNX purchased $391 million of its 5.875% Senior notes due in April 2022 at an average price equal to 103.8% of the principal amount and redeemed the $500 million 8.00% Senior notes due in April 2023 at an average price equal to 106.0% of the principal amount. See Note 11 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

Impairment of Other Intangible Assets

Intangible assets are tested for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the carrying amount of the asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The impairment loss to be recorded would be the excess of the asset's carrying value over its fair value.

In connection with the AEA with HG Energy (See Note 5 - Acquisition and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information) that occurred during the nine months ended September 30, 2018, CNX determined that the carrying value of the other intangible asset -third-party customer relationships exceeded its fair value, and an impairment of $19 million was included in Impairment of Other Intangible Assets in the Consolidated Statement of Income. No such transactions occurred in the current period.

Income Taxes

The effective income tax rate was 22.3% for the nine months ended September 30, 2019 compared to 24.1% for the nine months ended September 30, 2018. The effective rate for the nine months ended September 30, 2019 differs from the U.S. federal statutory rate of 21% primarily due to the impact of noncontrolling interest, equity compensation and state income taxes. The effective rate for the nine months ended September 30, 2018 differs from the U.S. federal statutory 21% primarily due to a benefit from the filing of a Federal 10-year net operating loss (“NOL”) carryback which resulted in the Company being able to utilize previously valued tax attributes at a tax rate differential of 14%, as well as non-controlling interest. The benefits were offset by increases for both state income taxes and state valuation allowances.

See Note 6 - Income Taxes in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
 For the Nine Months Ended September 30,
(in millions)2019 2018 Variance 
Percent
Change
Total Company Earnings Before Income Tax$350
 $993
 $(643) (64.8)%
Income Tax Expense$78
 $239
 $(161) (67.4)%
Effective Income Tax Rate22.3% 24.1% (1.8)%  


48

TOTAL E&P DIVISION ANALYSIS for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018:
The E&P division had earnings before income tax of $233 million for the nine months ended September 30, 2019 compared to earnings before income tax of $196 million for the nine months ended September 30, 2018. Variances by individual E&P segment are discussed below.
 For the Nine Months Ended Difference to Nine Months Ended
 September 30, 2019 September 30, 2018
 (in millions)Marcellus Utica CBM 
Other
Gas
 Total E&P Marcellus Utica CBM 
Other
Gas
 
Total
E&P
Natural Gas, NGLs and Oil Revenue$709
 $208
 $125
 $2
 $1,044
 $118
 $(118) $(28) $(13) $(41)
Gain on Commodity Derivative Instruments18
 6
 3
 213
 240
 17
 5
 3
 136
 161
Purchased Gas Revenue—
 —
 —
 64
 64
 —
 —
 —
 25
 25
Other Operating Income—
 —
 —
 10
 10
 —
 —
 —
 (12) (12)
Total Revenue and Other Operating Income727
 214
 128
 289
 1,358
 135
 (113) (25) 136
 133
Lease Operating Expense27
 13
 13
 —
 53
 (7) (13) (4) (1) (25)
Production, Ad Valorem, and Other Fees11
 4
 5
 —
 20
 (2) (1) —
 (1) (4)
Transportation, Gathering and Compression325
 24
 29
 —
 378
 97
 (20) (8) (4) 65
Depreciation, Depletion and Amortization186
 105
 52
 7
 350
 25
 (3) (7) (4) 11
Exploration and Production Related Other Costs—
 —
 —
 15
 15
 —
 —
 —
 6
 6
Purchased Gas Costs—
 —
 —
 62
 62
 —
 —
 —
 25
 25
Other Operating Expense—
 —
 —
 60
 60
 —
 —
 —
 9
 9
Selling, General and Administrative Costs

—
 —
 —
 95
 95
 —
 —
 —
 13
 13
Total Operating Costs and Expenses549
 146
 99
 239
 1,033
 113
 (37) (19) 43
 100
Interest Expense—
 —
 —
 92
 92
 —
 —
 —
 (4) (4)
Total E&P Division Costs549
 146
 99
 331
 1,125
 113
 (37) (19) 39
 96
Earnings (Loss) Before Income Tax$178
 $68
 $29
 $(42) $233
 $22
 $(76) $(6) $97
 $37



49

MARCELLUS SEGMENT
The Marcellus segment had earnings before income tax of $178 million for the nine months ended September 30, 2019 compared to earnings before income tax of $156 million for the nine months ended September 30, 2018.
 For the Nine Months Ended September 30,
 2019 2018 Variance 
Percent
Change
Marcellus Gas Sales Volumes (Bcf)245.3
 176.0
 69.3
 39.4 %
NGLs Sales Volumes (Bcfe)*22.5
 23.9
 (1.4) (5.9)%
Condensate Sales Volumes (Bcfe)*0.6
 1.3
 (0.7) (53.8)%
Total Marcellus Sales Volumes (Bcfe)*268.4
 201.2
 67.2
 33.4 %
        
Average Sales Price - Gas (per Mcf)$2.58
 $2.66
 $(0.08) (3.0)%
Gain on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.07
 $0.01
 $0.06
 600.0 %
Average Sales Price - NGLs (per Mcfe)*$3.20
 $4.67
 $(1.47) (31.5)%
Average Sales Price - Condensate (per Mcfe)*$7.43
 $8.91
 $(1.48) (16.6)%
        
Total Average Marcellus Sales Price (per Mcfe)$2.71
 $2.94
 $(0.23) (7.8)%
Average Marcellus Lease Operating Expenses (per Mcfe)0.10
 0.17
 (0.07) (41.2)%
Average Marcellus Production, Ad Valorem, and Other Fees (per Mcfe)0.04
 0.06
 (0.02) (33.3)%
Average Marcellus Transportation, Gathering and Compression Costs (per Mcfe)1.21
 1.13
 0.08
 7.1 %
Average Marcellus Depreciation, Depletion and Amortization Costs (per Mcfe)0.70
 0.81
 (0.11) (13.6)%
   Total Average Marcellus Costs (per Mcfe)$2.05
 $2.17
 $(0.12) (5.5)%
   Average Margin for Marcellus (per Mcfe)$0.66
 $0.77
 $(0.11) (14.3)%
* NGLs and Condensate are converted to Mcfe at the rate of one barrel equals six Mcf based upon the approximate relative energy content of oil and natural gas, which is not indicative of the relationship of oil, NGLs, condensate, and natural gas prices.

The Marcellus segment had natural gas, NGLs and oil revenue of $709 million for the nine months ended September 30, 2019 compared to $591 million for the nine months ended September 30, 2018. The $118 million increase was due to a 33.4% increase in total Marcellus sales volumes. The increase in sales volumes was primarily due to additional wells being turned in-line throughout 2018 and the first nine months of 2019 as part of the Company's ongoing drilling and completions program.

The decrease in the total average Marcellus sales price was primarily due to an $0.08 per Mcf decrease in the average sales price for natural gas and a $1.47 per Mcfe decrease in the average NGL sales price, offset in part by a $0.06 per Mcf increase in the realized gain on commodity derivative instruments resulting from the Company's hedging program. The notional amounts associated with these financial hedges represented approximately 185.9 Bcf of the Company's produced Marcellus gas sales volumes for the nine months ended September 30, 2019 at an average gain of $0.10 per Mcf. For the nine months ended September 30, 2018, these financial hedges represented approximately 148.9 Bcf at an average gain of $0.01 per Mcf.

Total operating costs and expenses for the Marcellus segment were $549 million for the nine months ended September 30, 2019 compared to $436 million for the nine months ended September 30, 2018. The increase in total dollars and decrease in unit costs for the Marcellus segment were due to the following items:

•Marcellus lease operating expenses were $27 million for the nine months ended September 30, 2019 compared to $34 million for the nine months ended September 30, 2018. The decrease in total dollars was primarily due to a decrease in water disposal costs in the current period due to an increase in the reuse of produced water in well completions activity, as well as a reduction in employee costs. The decrease in unit costs was driven by the decrease in total dollars, along with the 33.4% increase in total Marcellus sales volumes.

•Marcellus production, ad valorem, and other fees were $11 million for the nine months ended September 30, 2019 compared to $13 million for the nine months ended September 30, 2018. The decrease in total dollars was primarily related to a decrease in CNX's severance tax liability due to the production mix by state and lower natural gas prices. The decrease in unit costs was driven by the decreased total dollars, along with the 33.4% increase in total Marcellus sales volumes.



50

•Marcellus transportation, gathering and compression costs were $325 million for the nine months ended September 30, 2019 compared to $228 million for the nine months ended September 30, 2018. The increase in total dollars was primarily related to the increase in production which resulted in an increase in both CNX Midstream fees as well as an increase in utilized firm transportation expense. The increase in firm transportation total dollars was also related to new contracts, which began during the 2019 period, that give CNX the ability to move and sell natural gas outside of the Appalachian basin. These increases were offset by lower processing costs from a drier production mix. The increase in unit costs was driven by the increased total dollars described above.
•Depreciation, depletion and amortization costs attributable to the Marcellus segment were $186 million for the nine months ended September 30, 2019 compared to $161 million for the nine months ended September 30, 2018. These amounts included depletion on a unit of production basis of $0.68 per Mcfe and $0.79 per Mcfe, respectively. The decrease in units of production depreciation, depletion and amortization rate is the result of positive reserve revisions within our core development area in the current period. The remaining depreciation, depletion and amortization costs were either recorded on a straight-line basis or related to asset retirement obligations.

UTICA SEGMENT

The Utica segment had earnings before income tax of $68 million for the nine months ended September 30, 2019 compared to earnings before income tax of $144 million for the nine months ended September 30, 2018.
 For the Nine Months Ended September 30,
 2019 2018 Variance 
Percent
Change
Utica Gas Sales Volumes (Bcf)85.4
 113.7
 (28.3) (24.9)%
NGLs Sales Volumes (Bcfe)*—
 5.5
 (5.5) (100.0)%
Condensate Sales Volumes (Bcfe)*—
 0.4
 (0.4) (100.0)%
Total Utica Sales Volumes (Bcfe)*85.4
 119.7
 (34.3) (28.7)%
        
Average Sales Price - Gas (per Mcf)$2.43
 $2.61
 $(0.18) (6.9)%
Gain on Commodity Derivative Instruments - Cash Settlement- Gas (per Mcf)$0.07
 $0.01
 $0.06
 600.0 %
Average Sales Price - NGLs (per Mcfe)*$—
 $4.60
 $(4.60) (100.0)%
Average Sales Price - Condensate (per Mcfe)*$—
 $9.03
 $(9.03) (100.0)%
        
Total Average Utica Sales Price (per Mcfe)$2.50
 $2.73
 $(0.23) (8.4)%
Average Utica Lease Operating Expenses (per Mcfe)0.15
 0.22
 (0.07) (31.8)%
Average Utica Production, Ad Valorem, and Other Fees (per Mcfe)0.04
 0.04
 —
 — %
Average Utica Transportation, Gathering and Compression Costs (per Mcfe)0.28
 0.37
 (0.09) (24.3)%
Average Utica Depreciation, Depletion and Amortization Costs (per Mcfe)1.23
 0.90
 0.33
 36.7 %
   Total Average Utica Costs (per Mcfe)$1.70
 $1.53
 $0.17
 11.1 %
   Average Margin for Utica (per Mcfe)$0.80
 $1.20
 $(0.40) (33.3)%

*NGLs and Condensate are converted to Mcfe at the rate of one barrel equals six Mcf based upon the approximate relative energy content of oil and natural gas, which is not indicative of the relationship of oil, NGLs, condensate, and natural gas prices.

The Utica segment had natural gas, NGLs and oil revenue of $208 million for the nine months ended September 30, 2019 compared to $326 million for the nine months ended September 30, 2018. The $118 million decrease was due to the 28.7% decrease in total Utica sales volumes and a 6.9% decrease in the average sales price for natural gas. The decrease in total Utica sales volumes was primarily due to the sale of substantially all of CNX's Ohio Utica JV assets in the third quarter of 2018 as well as normal production declines in the remaining dry Utica wells.

The decrease in total average Utica sales price was primarily due to a $0.18 per Mcf decrease in average gas sales price. Additionally, there was a $0.11 per Mcfe decrease in the uplift from NGLs and condensate sales volumes when excluding the impact of hedging due to the sale of the previously mentioned Ohio JV assets in the third quarter of 2018 which consisted primarily of wet Utica production. The decreases were partially offset by a $0.06 per Mcf increase in the realized gain on commodity derivative instruments. The notional amounts associated with these financial hedges represented approximately 60.6 Bcf of the


51

Company's produced Utica gas sales volumes for the nine months ended September 30, 2019 at an average gain of $0.10 per Mcf. For the nine months ended September 30, 2018, these financial hedges represented approximately 78.7 Bcf at an average gain of $0.01 per Mcf.

Total operating costs and expenses for the Utica segment were $146 million for the nine months ended September 30, 2019 compared to $183 million for the nine months ended September 30, 2018. The decrease in total dollars and increase in unit costs for the Utica segment were due to the following items:

•Utica lease operating expense was $13 million for the nine months ended September 30, 2019 compared to $26 million for the nine months ended September 30, 2018. The decrease in total dollars was primarily due to a decrease in water disposal costs due to lower production volumes, an increase in reuse of produced water in well completions and a reduction in well operating costs due to the overall decrease in Utica volumes described above. The decrease in unit costs was driven by the decrease in total dollars.

•Utica transportation, gathering and compression costs were $24 million for the nine months ended September 30, 2019 compared to $44 million for the nine months ended September 30, 2018. The $20 million decrease in total dollars and $0.09 per Mcfe decrease in unit costs were both due to the overall decrease in Utica volumes as well as the shift to lower cost dry Utica production.

•Depreciation, depletion and amortization costs attributable to the Utica segment were $105 million for the nine months ended September 30, 2019 compared to $108 million for the nine months ended September 30, 2018. These amounts included depletion on a unit of production basis of $1.17 per Mcfe and $0.90 per Mcfe, respectively. The increase in the units of production depreciation, depletion and amortization rate was due to negative reserve revisions, an increase in capital expenditures and a higher depreciation, depletion and amortization rate on deep dry Utica wells compared to the lower capital cost Utica wells which were part of the Ohio JV asset sale in 2018. The remaining depreciation, depletion and amortization costs were either recorded on a straight-line basis or related to asset retirement obligations.

COALBED METHANE (CBM) SEGMENT
The CBM segment had earnings before income tax of $29 million for the nine months ended September 30, 2019 compared to earnings before income tax of $35 million for the nine months ended September 30, 2018.
 For the Nine Months Ended September 30,
 2019 2018 Variance 
Percent
Change
CBM Gas Sales Volumes (Bcf)41.7
 45.4
 (3.7) (8.1)%
        
Average Sales Price - Gas (per Mcf)$3.00
 $3.37
 $(0.37) (11.0)%
Gain on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.07
 $0.01
 $0.06
 600.0 %
        
Total Average CBM Sales Price (per Mcf)$3.07
 $3.37
 $(0.30) (8.9)%
Average CBM Lease Operating Expenses (per Mcf)0.30
 0.37
 (0.07) (18.9)%
Average CBM Production, Ad Valorem, and Other Fees (per Mcf)0.13
 0.12
 0.01
 8.3 %
Average CBM Transportation, Gathering and Compression Costs (per Mcf)0.70
 0.82
 (0.12) (14.6)%
Average CBM Depreciation, Depletion and Amortization Costs (per Mcf)1.24
 1.29
 (0.05) (3.9)%
   Total Average CBM Costs (per Mcf)$2.37
 $2.60
 $(0.23) (8.8)%
   Average Margin for CBM (per Mcf)$0.70
 $0.77
 $(0.07) (9.1)%

The CBM segment had natural gas revenue of $125 million for the nine months ended September 30, 2019 compared to $153 million for the nine months ended September 30, 2018. The $28 million decrease was due to the 8.1% decrease in total CBM sales volumes and the 11.0% decrease in the average gas sales price. The decrease in CBM sales volumes was primarily due to normal well declines, as well as the sale of certain CBM assets that were sold along with the majority of CNX's shallow oil and gas assets in 2018 (See Note 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information).



52

The total average CBM sales price decreased $0.30 per Mcf due to a $0.37 decrease in average gas sales price, offset in part by a $0.06 per Mcf increase in the gain on commodity derivative instruments resulting from the Company's hedging program. The notional amounts associated with these financial hedges represented approximately 29.6 Bcf of the Company's produced CBM sales volumes for the nine months ended September 30, 2019 at an average gain of $0.10 per Mcf. For the nine months ended September 30, 2018, these financial hedges represented approximately 34.8 Bcf at an average gain of $0.01 per Mcf.

Total operating costs and expenses for the CBM segment were $99 million for the nine months ended September 30, 2019 compared to $118 million for the nine months ended September 30, 2018. The decrease in total dollars and decrease in unit costs for the CBM segment were due to the following items:

•CBM lease operating expense was $13 million for the nine months ended September 30, 2019 compared to $17 million for the nine months ended September 30, 2018. The $4 million decrease was primarily due to reductions in contractor services, a decrease in repairs and maintenance costs, and a reduction in employee costs. The decrease in unit costs was also due to the decrease in total dollars.

•CBM transportation, gathering and compression costs were $29 million for the nine months ended September 30, 2019 compared to $37 million for the nine months ended September 30, 2018. The $8 million decrease in total dollars as well as the $0.12 per Mcf decrease in unit costs were primarily related to a decrease in electrical power expense as well as a decrease in contractor services.

•Depreciation, depletion and amortization costs attributable to the CBM segment were $52 million for the nine months ended September 30, 2019 compared to $59 million for the nine months ended September 30, 2018. These amounts included depletion on a unit of production basis of $0.68 per Mcfe and $0.70 per Mcfe, respectively. The remaining depreciation, depletion and amortization costs were either recorded on a straight-line basis or related to asset retirement obligations.

OTHER GAS SEGMENT

The Other Gas segment had a loss before income tax of $42 million for the nine months ended September 30, 2019 compared to a loss before income tax of $139 million for the nine months ended September 30, 2018.
 For the Nine Months Ended September 30,
 2019 2018 Variance Percent
Change
Other Gas Sales Volumes (Bcf)0.3
 4.6
 (4.3) (93.5)%
Oil Sales Volumes (Bcfe)*—
 0.1
 (0.1) (100.0)%
Total Other Sales Volumes (Bcfe)*0.3
 4.7
 (4.4) (93.6)%

*Oil is converted to Mcfe at the rate of one barrel equals six Mcf based upon the approximate relative energy content of oil and natural gas, which is not indicative of the relationship of oil and natural gas prices.

The Other Gas segment includes activity not assigned to the Marcellus, Utica, or CBM segments. This segment also includes purchased gas activity, unrealized gain on commodity derivative instruments, exploration and production related other costs and other operational activity not assigned to a specific segment.

Other Gas sales volumes were primarily related to shallow oil and gas production. CNX sold substantially all of these assets on March 30, 2018 (See Note 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information). There was $2 million of natural gas and oil revenue related to the Other Gas segment for the nine months ended September 30, 2019 compared to $15 million for the nine months ended September 30, 2018. The decrease in natural gas and oil revenue was due to the asset sale. Total operating costs and expenses related to these other gas sales volumes were $5 million for the nine months ended September 30, 2019 compared to $17 million for the nine months ended September 30, 2018.

The Other Gas segment recognized an unrealized gain on commodity derivative instruments of $214 million as well as cash settlements paid of $1 million for the nine months ended September 30, 2019. For the nine months ended September 30, 2018, the Other Gas segment recognized an unrealized gain on commodity derivative instruments of $76 million as well as cash settlements received of $1 million. The unrealized gain on commodity derivative instruments represents changes in the fair value of all of the Company's existing commodity hedges on a mark-to-market basis.


53

Purchased Gas

Purchased gas volumes represent volumes of gas purchased at market prices from third-parties and then resoldplans change in order to fulfill contracts with certain customersoptimize system design and to balance supply. Purchased gas revenues were $64 million foractively manage capital investments. During the ninethree months ended September 30, 2019 compared to $39 million for the nine months ended September 30, 2018. Purchased gas costs were $62 million for the nine months ended September 30, 2019 compared to $37 million for the nine months ended September 30, 2018. The period-to-period increase in purchased gas revenue was due to an increase in purchased gas sales volumes, offset in part by a decrease in averages sales price.
 For the Nine Months Ended September 30,
 2019 2018 Variance Percent
Change
Purchased Gas Sales Volumes (in Bcf)26.9
 12.9
 14.0
 108.5 %
Average Sales Price (per Mcf)$2.39
 $2.98
 $(0.59) (19.8)%
Average Cost (per Mcf)$2.33
 $2.89
 $(0.56) (19.4)%

Other Operating Income

Other operating income was $10 million for the nine months ended September 30, 2019 compared to $22 million for the nine months ended September 30, 2018. The $12 million decrease was due to the following items:
 For the Nine Months Ended September 30,
(in millions)2019 2018 Variance Percent
Change
Water Income$1
 $11
 $(10) (90.9)%
Equity in Earnings of Affiliates2
 4
 (2) (50.0)%
Gathering Income7
 7
 —
 — %
Total Other Operating Income$10
 $22
 $(12) (54.5)%

Water income decreased $10 million due to nominal sales of freshwater to third-parties for hydraulic fracturing in the 2019 period compared to the 2018 period.

Exploration and Production Related Other Costs

Exploration and production related other costs were $15 million for the nine months ended September 30, 2019 compared to $9 million for the nine months ended September 30, 2018. The $6 million increase was due to the following items:
 For the Nine Months Ended September 30,
(in millions)2019 2018 Variance 
Percent
Change
Seismic Activity$6
 $—
 $6
 100.0 %
Lease Expiration Costs5
 4
 1
 25.0 %
Land Rentals2
 3
 (1) (33.3)%
Other2
 2
 —
 — %
Total Exploration and Production Other Costs$15
 $9
 $6
 66.7 %

Seismic activity increased in the period-to-period comparison due to additional geophysical research in the current period related to the Utica segment.


54

Other Operating Expense

Other operating expense was $60 million for the nine months ended September 30, 2019 compared to $51 million for the nine months ended September 30, 2018. The $9 million increase was due to the following items:
 For the Nine Months Ended September 30,
 2019 2018 Variance Percent
Change
Unutilized Firm Transportation and Processing Fees$43
 $29
 $14
 48.3 %
Idle Equipment and Service Charges8
 5
 3
 60.0 %
Insurance Expense2
 2
 —
 — %
Severance Expense1
 1
 —
 — %
Litigation Expense—
 3
 (3) (100.0)%
Water Expense1
 5
 (4) (80.0)%
Other5
 6
 (1) (16.7)%
Total Other Operating Expense$60
 $51
 $9
 17.6 %

Unutilized Firm Transportation and Processing Fees represent pipeline transportation capacity obtained to enable gas production to flow uninterrupted as sales volumes increase, as well as additional processing capacity for NGLs. The increase in the period-to-period comparison was primarily due to previously-acquired capacity which was not utilized during the current period to transport the Company’s flowing production. The Company attempts to minimize this expense by releasing (selling) unutilized firm transportation capacity to other parties when possible and when beneficial. The revenue received when this capacity is released (sold) is included in Gathering Income in Total Other Operating Income above.
Idle Equipment and Service Charges primarily relate to the temporary idling of some of the Company's natural gas drilling rigs as well as related equipment and other services that may be needed in the natural gas drilling and completions process. The increase of $3 million in the period-to-period comparison was primarily the result of the acceleration of five months of idle rig expense due to CNX terminating one of its drilling rig contacts early, as well as additional idle service expense related to the Shaw 1G Utica Shale well that occurred in the first quarter of 2019.
•
Water Expense decreased $4 million due to the associated costs related to the sales of freshwater to third-parties for hydraulic fracturing in the 2018 period in Total Other Operating Income above. There were nominal sales in the 2019 period.

Selling, General and Administrative

SG&A costs represent direct charges for the management and operation of CNX's E&P division. SG&A costs were $95 million for the nine months ended September 30, 2019 compared to $82 million for the nine months ended September 30, 2018. Refer to the discussion of total company SG&A costs contained in the section "Net Income Attributable to CNX Resources Shareholders"of this Form 10-Q for a detailed cost explanation.

Interest Expense
Interest expense of $92 million was recognized in the nine months ended September 30, 2019 compared to $96 million in the nine months ended September 30, 2018. The $4 million decrease was primarily due to the reduction in higher cost long-term debt, resulting from the $500 million purchase of the outstanding 8.00% senior notes due in April 2023 and the $391 million purchase of the outstanding 5.875% senior notes due in April 2022 during the nine months ended September 30, 2018. Additionally, the Company purchased $400 million of its outstanding 5.875% senior notes due in April 2022 during the nine months ended September 30, 2019. These decreases were partially offset by a completed private offering of $500 million of 7.25% senior notes due March 2027 during the nine months ended September 30, 2019, as well as additional borrowings on the CNX credit facility. See Note 11 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.


55

TOTAL MIDSTREAM DIVISION ANALYSIS for the nine months ended September 30, 2019 compared to the period January 3, 2018 through September 30, 2018:

CNX's Midstream Division's principal activity is the ownership, operation, development and acquisition of natural gas gathering and other midstream energy assets of CNX Gathering and CNXM, which provide natural gas gathering services for the Company's produced gas, as well as for other independent third-parties in the Marcellus Shale and Utica Shale in Pennsylvania and West Virginia. Excluded from the Midstream Division are the gathering assets and operations of CNX that have not been contributed to CNX Gathering and CNXM.

On January 3, 2018, CNX completed the Midstream Acquisition (See Note 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information). CNX Gathering holds all of the interests in CNX Midstream GP LLC, which holds the general partner interest and incentive distribution rights in CNXM. As a result of this transaction, CNX owns and controls 100% of CNX Gathering, making CNXM a single-sponsor master limited partnership and thus the Company began consolidating CNXM on January 3, 2018.
 (in millions)For the nine months ended September 30, 2019 For the period January 3, 2018 through September 30, 2018 Variance
Midstream Revenue - Related Party$169
 $117
 $52
Midstream Revenue - Third Party56
 70
 (14)
Total Revenue$225
 $187
 $38
      
Transportation, Gathering and Compression$36
 $36
 $—
Depreciation, Depletion and Amortization25
 24
 1
Selling, General, and Administrative Costs
14
 17
 (3)
Total Operating Costs and Expenses75
 77
 (2)
Other Expense1
 —
 1
Loss (Gain) on Asset Sales and Abandonments7
 (2) 9
Interest Expense23
 17
 6
Total Midstream Division Costs106
 92
 14
Earnings Before Income Tax$119
 $95
 $24

Midstream Revenue

Midstream revenue consists of revenue related to volumes gathered on behalf of CNX and other third-party natural gas producers. CNXM charges a higher fee for natural gas that is shipped on its wet system compared to gas shipped through its dry system. CNXM revenue can also be impacted by the relative mix of gathered volumes by area, which may vary depending upon delivery point and may change dynamically depending on commodity prices at time of shipment.

The table below summarizes volumes gathered by gas type:
 For the nine months ended September 30, 2019 For the period January 3, 2018 through September 30, 2018 Variance
Dry Gas (BBtu/d) (*)862
 702
 160
Wet Gas (BBtu/d) (*)705
 690
 15
Other (BBtu/d) (*)(**)196
 12
 184
Total Gathered Volumes1,763
 1,404
 359
(*) Classification as dry or wet is based upon the shipping destination of the related volumes. Because CNXM's customers have the option to ship a portion of their natural gas to destinations associated with either our wet system or our dry system, due to any number of factors, volumes may be classified as “wet” in one period and as “dry” in the comparative period.
(**) Includes condensate handling and third-party volumes under high-pressure short-haul agreements.






56


Transportation, Gathering and Compression 

Transportation, Gathering and Compression costs were $36 million for both the nine months ended September 30, 2019 and the period January 3, 2018 through September 30, 2018, and are comprised of items directly related to the cost of gathering natural gas at the wellhead and transporting it to interstate pipelines or other local sales points. These costs include items such as electrically-powered compression, compressor rental, repairs and maintenance, supplies, treating and contract services.

Selling, General and Administrative Expense

SG&A expense is comprised of direct charges for the management and operation of CNXM assets. SG&A costs were $14 million for the nine months ended September 30, 2019 compared to $17 million for the period January 3, 2018 through September 30, 2018. Refer to the discussion of total Company SG&A costs contained in the section "Net Income Attributable to CNX Resources Shareholders"of this Form 10-Q for a detailed cost explanation.

Depreciation, Depletion and Amortization Expense   
Depreciation expense is recognized on gathering and other equipment on a straight-line basis, with useful lives ranging from 25 years to 40 years.

Loss (Gain) on Asset Sales and Abandonments

During the nine months ended September 30,31, 2019, CNXM abandoned the construction of a compressor station that was designed to support additional production within certain areas of what is referred to as their "Anchor Systems," incurring a loss of $7 million that is included in Gain(Gain) Loss on Asset Sales and Abandonments, net in the Consolidated Statements of Income. CNXM continues to evaluate projects as CNX's and third-party customer development plans changeNo such transactions occurred in order to optimize system design and to actively manage capital investments. During the period January 3, 2018 through September 30, 2018, CNXM sold property and equipment to an unrelated third-party for $6 million in cash proceeds resulting in a gain of $2 million.current period.

Interest Expense
        
Interest expense is comprised of interest on the outstanding balance under CNXM's senior notes due 2026 and its revolving credit facility. Interest expense was $23$9 million for the ninethree months ended September 30, 2019March 31, 2020 compared to $17$7 million for the period January 3, 2018 through September 30, 2018.three months ended March 31, 2019. The increase in the period-to-period comparison was due to additional borrowings on the revolving credit facility.



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Liquidity and Capital Resources

CNX generally has satisfied its working capital requirements and funded its capital expenditures and debt service obligations with cash generated from operations and proceeds from borrowings. CNX currently believes that cash generated from operations, asset sales and the Company's borrowing capacity will be sufficient to meet the Company's working capital requirements, anticipated capital expenditures (other than major acquisitions), scheduled debt payments, anticipated dividend payments and to provide required letters of credit.credit for the next fiscal year. Nevertheless, the ability of CNX to satisfy its working capital requirements, to service its debt obligations, to fund planned capital expenditures, or to pay dividends will depend upon future operating performance, which will be affected by prevailing economic conditions in the natural gas industry and other financial and business factors, including the current COVID 19 pandemic, some of which are beyond CNX’s control.
From time to time, CNX is required to post financial assurances to satisfy contractual and other requirements generated in the normal course of business. Some of these assurances are posted to comply with federal, state or other government agencies' statutes and regulations. CNX sometimes uses letters of credit to satisfy these requirements and these letters of credit reduce the Company's borrowing facility capacity.
UncertaintyCNX continuously reviews its liquidity and capital resources. If market conditions were to change, for instance due to the the significant decline in oil prices or uncertainty created by the financial markets brings additional potential risksCOVID-19 pandemic, and our revenue was reduced significantly or operating costs were to CNX. These risks include declinesincrease significantly, our cash flows and liquidity could be reduced.
As of March 31, 2020, CNX was in the Company's stock price, less availability and higher costs of additional credit, potential counterparty defaults, and commercial bank failures. Financial market disruptions may impact the Company's collection of trade receivables. As a result, CNX regularly monitors the creditworthinesscompliance with all of its customersdebt covenants. After considering the current and counterpartiespotential effect of the significant decline in oil prices and manages credit exposure through payment terms, credit limits, prepayments and security.uncertainty created by the COVID-19 pandemic on its operations, CNX believes thatcurrently expects to remain in compliance with its current group of customers is financially sound and represents no abnormal business risk.debt covenants.

In order to manage the market risk exposure of volatile natural gas prices in the future, CNX enters into various physical natural gas supply transactions with both gas marketers and end users for terms varying in length. CNX has also entered into various natural gas swap and option transactions, which exist parallel to the underlying physical transactions. The fair value of these contracts was a net asset of $313$370 million at September 30, 2019March 31, 2020 and a net asset of $99$406 million at December 31, 2018.2019. The Company has not experienced any issues of non-performance by derivative counterparties.
CNX frequently evaluates potential acquisitions. CNX has funded acquisitions with cash generated from operations and a variety of other sources, depending on the size of the transaction, including debt and equity financing. There can be no assurance that additional capital resources, including debt and equity financing, will be available to CNX on terms which CNX finds acceptable, or at all.


Cash Flows (in millions)
 For the Three Months Ended March 31,
 20202019Change
Cash Provided by Operating Activities$267  $309  $(42) 
Cash Used in Investing Activities$(138) $(293) $155  
Cash Used in Financing Activities$(108) $(9) $(99) 
 For the Nine Months Ended September 30,
 2019 2018 Change
Cash Provided by Operating Activities$866
 $690
 $176
Cash Used in Investing Activities$(949) $(585) $(364)
Cash Provided by (Used in) Financing Activities$71
 $(572) $643

Cash flows from operating activities changed in the period-to-period comparison primarily due to the following items:

•Net income decreased $482$241 million in the period-to-period comparison.
•Adjustments to reconcile net income to cash provided by operating activities primarily consisted of a $181$473 million impairment of goodwill, a $62 million impairment of exploration and production properties, an $88 million change in deferred income taxes, a $624 million decrease in gain on previously held equity interest, a $148 million decrease in gain on asset sales and abandonments, a $138$118 million net change in commodity derivative instruments, and a $21$19 million increase in stock-based compensation, a $19 million decrease in impairment of other intangible assets, and a $47 million decrease in the lossgain on debt extinguishment.

Cash flows from investing activities changed in the period-to-period comparison primarily due to the following items:

•Capital expenditures increased $170decreased $147 million in the period-to-period comparison primarily due to increaseddecreased expenditures in the Utica and Marcellus Shale plays resulting from increaseddecreased drilling and completions activity as well as additional water expenditures due to the installation of new water pipelines.activity. CNXM's capital expenditures increaseddecreased due to additionalless spend in order to support bothalign with CNX's and third-party customer development plans.plans as well as the current major projects completed in 2019.
•Proceeds from asset sales decreased $486increased $8 million primarilymainly due to the 2018 sale of substantially all of the Ohio Utica Joint Venture Assetsincreased surface sales in the wet gas Utica Shale areas of Belmont, Guernsey, Harrison, and Noble counties along with the 2018 sale of our shallow oil and gas and CBM assets in Pennsylvania and West Virginia. See Note 5 - Acquisitions

three months ended March 31, 2020.

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and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
In January 2018, CNX completed the Midstream Acquisition for a net payment of $299 million. See Note 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

Cash flows from financing activities changed in the period-to-period comparison primarily due to the following items:

•During the ninethree months ended September 30,March 31, 2020, CNX paid $60 million to purchase $71 million of the senior notes due in 2022 at 83.9% of the principal amount. During the three months ended March 31, 2019, CNX paid $406 million to repurchasepurchase $400 million of the senior notes due in 2022 at 101.5% of the principal amount. During the nine months ended September 30, 2018, CNX paid $530 million to repurchase all of the remaining senior notes due in 2023 at 106.0% of the principal amount as well as $405 million to repurchase $391 million of the senior notes due in 2022 at 103.8% of the principal amount. See Note 119 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
•In the three months ended March 31, 2020, there were $35 million of net proceeds from the CNXM credit facility compared to $53 million of net proceeds during the three months ended March 31, 2019.
•In the three months ended March 31, 2020, there were $224 million of net payments on the CNX credit facility compared to $98 million of net payments during the three months ended March 31, 2019.
•During the ninethree months ended September 30,March 31, 2019, CNX received proceeds of $500 million from the issuance of senior notes due in 2027. During the nine months ended September 30, 2018, CNX received proceeds of $394 million from the issuance of CNXM's senior notes due in 2026. See Note 119 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
•In the ninethree months ended September 30,March 31, 2020 there were $173 million of net proceeds from the Cardinal States Gathering LLC and CSG Holdings II LLC non-revolving credit facilities. See Note 9 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
•In the three months ended March 31, 2019, CNX repurchased $117$32 million of its common stock on the open market compared to $294 millionno purchases in the ninethree months ended September 30, 2018.March 31, 2020.
In the nine months ended September 30, 2019, there was $1 million of net proceeds from the CNX credit facility and $439 million of proceeds in the 2018 period.
In the nine months ended September 30, 2019, there were $162 million of net proceeds from the CNXM credit facility compared to $106 million of net payments during the nine months ended September 30, 2018.
In the nine months ended September 30, 2019, there were $10 million in debt•Debt issuance and financing fees comparedincreased $8 million primarily due to $20 million during the nine months ended September 30, 2018.fees associated with the borrowings on the Cardinal States Gathering LLC and CSG Holdings II LLC non-revolving credit facilities.
In the nine months ended September 30, 2019, there were $47 million in distributions to CNXM unitholders, compared to $41 million during the nine months ended September 30, 2018.


The following is a summary of the Company's significant contractual obligations at September 30, 2019March 31, 2020 (in thousands):
Payments due by Year
Less Than
1 Year		1-3 Years3-5 YearsMore Than
5 Years		Total
Payments due by Year
Less Than
1 Year
 1-3 Years 3-5 Years 
More Than
5 Years
 Total
Purchase Order Firm Commitments$7,670
 $2,185
 $485
 $—
 $10,340
Purchase Order Firm Commitments$2,082  $1,452  $162  $—  $3,696  
Gas Firm Transportation and Processing244,865
 486,838
 412,475
 1,113,008
 2,257,186
Gas Firm Transportation and Processing247,842  474,115  398,018  1,033,218  2,153,193  
Long-Term Debt—
 895,415
 859,200
 895,187
 2,649,802
Long-Term Debt20,451  870,424  830,624  955,118  2,676,617  
Interest on Long-Term Debt147,753
 297,695
 173,943
 129,626
 749,017
Interest on Long-Term Debt144,219  261,801  158,273  105,214  669,507  
Finance Lease Obligations7,203
 8,881
 519
 —
 16,603
Finance Lease Obligations7,200  5,634  461  —  13,295  
Interest on Finance Lease Obligations933
 498
 94
 —
 1,525
Interest on Finance Lease Obligations666  217  53  —  936  
Operating Lease Obligations65,061
 88,077
 7,574
 26,863
 187,575
Operating Lease Obligations54,622  60,123  7,198  25,142  147,085  
Interest on Operating Lease Obligations7,714
 7,400
 3,326
 5,171
 23,611
Interest on Operating Lease Obligations5,103  5,006  3,121  4,466  17,696  
Long-Term Liabilities—Employee Related (a)1,841
 3,934
 4,399
 25,344
 35,518
Long-Term Liabilities—Employee Related (a)1,812  3,887  4,431  31,852  41,982  
Other Long-Term Liabilities (b)207,067
 7,625
 8,325
 18,173
 241,190
Other Long-Term Liabilities (b)206,745  17,438  12,998  33,951  271,132  
Total Contractual Obligations (c)$690,107
 $1,798,548
 $1,470,340
 $2,213,372
 $6,172,367
Total Contractual Obligations (c)$690,742  $1,700,097  $1,415,339  $2,188,961  $5,995,139  
 _________________________
(a)Employee related long-term liabilities include salaried retirement contributions and work-related injuries and illnesses.
(b)Other long-term liabilities include royalties and other long-term liability costs.
(c)The significant obligation table does not include obligations to taxing authorities due to the uncertainty surrounding the ultimate settlement of amounts and timing of these obligations.

(a)Employee related long-term liabilities include salaried retirement contributions and work-related injuries and illnesses.

(b)Other long-term liabilities include royalties and other long-term liability costs.

(c)The significant obligation table does not include obligations to taxing authorities due to the uncertainty surrounding the ultimate settlement of amounts and timing of these obligations.
59



Debt
At September 30, 2019,March 31, 2020, CNX had total long-term debt of $2,650$2,677 million, including the current portion of long-term debt of $20 million and excluding unamortized debt issuance costs. This long-term debt consisted of:
•An aggregate principal amount of $895$823 million of 5.875% Senior Notes due in April 2022 plus $1 million of unamortized bond premium. Interest on the notes is payable April 15 and October 15 of each year. Payment of the principal and interest on the notes is guaranteed by most of CNX's subsidiaries but does not include CNXM.CNXM or CSG Holdings III LLC (or its subsidiaries).
An aggregate principal amount of $613 million in outstanding borrowings under the CNX credit facility.
•An aggregate principal amount of $500 million of 7.25% Senior Notes due in March 2027. Interest on the notes is payable March 14 and September 14 of each year. Payment of the principal and interest on the notes is guaranteed by most of CNX's subsidiaries but does not include CNXM.CNXM or CSG Holdings III LLC (or its subsidiaries).
•An aggregate principal amount of $437 million in outstanding borrowings under the CNX Revolving Credit Facility.

46

•An aggregate principal amount of $400 million of 6.50% Senior Notes due in March 2026 issued by CNXM, less $5 million of unamortized bond discount. Interest on the notes is payable March 15 and September 15 of each year. Payment of the principal and interest on the notes is guaranteed by certain of CNXM's subsidiaries. CNX is not a guarantor of these notes.
•An aggregate principal amount of $246$347 million in outstanding borrowings under the CNXM revolver. CNX is not a guarantor of CNXM's revolving credit facility.

•Cardinal States Gathering Company Credit Facility of $125 million less $1 million of unamortized discount. Interest and a portion of the obligation are paid quarterly.
•CSG Holdings II LLC Credit Facility of $50 million less a nominal unamortized discount. Interest and a portion of the obligation are paid quarterly.

Total Equity and Dividends
CNX had total equity of $5,222$4,645 million at September 30, 2019March 31, 2020 compared to $5,082$4,962 million at December 31, 2018.2019. See the Consolidated Statements of Stockholders' Equity in Item 1 of this Form 10-Q for additional details.
The declaration and payment of dividends by CNX is subject to the discretion of CNX's Board of Directors, and no assurance can be given that CNX will pay dividends in the future. CNX's Board of Directors determines whether dividends will be paid quarterly. CNX suspended its quarterly dividend in March 2016 to further reflect the Company's increased emphasis on growth. The determination to pay dividends in the future will depend upon, among other things, general business conditions, CNX's financial results, contractual and legal restrictions regarding the payment of dividends by CNX, planned investments by CNX, and such other factors as the Board of Directors deems relevant. The Company's Credit Facility limits CNX's ability to pay dividends in excess of an annual rate of $0.10 per share when the Company's net leverage ratio exceeds 3.00 to 1.00 and is subject to availability under the Credit Facility of at least 15% of the aggregate commitments. The net leverage ratio was 2.452.30 to 1.00 at September 30, 2019.March 31, 2020. The Credit Facility does not permit dividend payments in the event of default. The indentures to the 5.875% Senior Notes due in April 2022 and the 7.25% Senior Notes due in March 2027 limit dividends to $0.50 per share annually unless several conditions are met. These conditions include no defaults, ability to incur additional debt and other payment limitations under the indentures. There were no defaults in the ninethree months ended September 30, 2019.March 31, 2020.

On October 16, 2019April 27, 2020 the Board of Directors of CNX Midstream GP LLC, the general partner of CNX Midstream Partners LP, announced the declaration of a cash distribution of $0.4001$0.0829 per unit with respect to the thirdfirst quarter of 2019.2020. The distribution will be made on November 12, 2019May 15, 2020 to unitholders of record as of the close of business on November 5, 2019. The distribution, which equates to an annual rate of $1.6004 per unit, represents an increase of 3.5% over the prior quarter, and an increase of 15% over the distribution paid with respect to the third quarter of 2018.May 7, 2020.
Off-Balance Sheet Transactions

CNX does not maintain off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on the Company’s 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. CNX uses a combination of surety bonds, corporate guarantees and letters of credit to secure the Company's financial obligations for employee-related, environmental, performance and various other items which are not reflected in the Consolidated Balance Sheet at September 30, 2019.March 31, 2020. Management believes these items will expire without being funded. See Note 1310 - Commitments and Contingent Liabilities in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional details of the various financial guarantees that have been issued by CNX.


6047


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 to differ materially from projected results. 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,” “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:

•prices for natural gas and natural gas liquids are volatile and can fluctuate widely based upon a number of factors beyond our control including oversupply relative to the demand for our products, weather and the price and availability of alternative fuels;
•our dependence on gathering, processing and transportation facilities and other midstream facilities owned by CNX Midstream Partners LP (NYSE: CNXM) (CNXM) and others;
•uncertainties in estimating our economically recoverable natural gas reserves, and inaccuracies in our estimates;
•the high-risk nature of drilling and developing natural gas wells;
•our identified drilling locations are scheduled out over multiple years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling;
•challenges associated with strategic determinations, including the allocation of capital and other resources to strategic opportunities;
•the substantial capital expenditures required for our development and exploration projects, as well as CNXM’s midstream system development, require substantial capital expenditures;development;
•the impact of potential, as well as any adopted, environmental regulations, including anythose relating to greenhouse gas emissions on our operating costs as well as on the market for natural gas and for our securities;emissions;
•environmental regulations can increase costs and introduce uncertainty that could adversely impact the market for natural gas with potential short and long-term liabilities;
our operations are subject to operating risks that could increase our operating expenses and decrease our production levels which could adversely affect our results of operation and our operations are also subject to hazards and any losses or liabilities we suffer from hazards, which occur in our operations may not be fully covered by our insurance policies;
•decreases in the availability of, or increases in the price of, required personnel, services, equipment, parts and raw materials in sufficient quantities or at reasonable costs to support our operations;
•if natural gas prices decrease or drilling efforts are unsuccessful, we may be required to record write-downs of our proved natural gas properties;
•the availability of storage capacity for refined products such as crude, and refinery inputs including condensate, c5+ and butane;
•changes in assumptions impacting management’s estimates of future financial results as well as other assumptions such as movement in our stock price, weighted-average cost of capital, terminal growth rates and industry multiples, could cause goodwill and other intangible assets we hold to become impaired and result in material non-cash charges to earnings;
•a loss of our competitive position because of the competitive nature of the natural gas industry, consolidation within the industry or overcapacity in the industry adversely affecting our ability to sell our products and midstream services, which could impair our profitability;services;
•deterioration in the economic conditions in any of the industries in which our customers operate, a domestic or worldwide financial downturn, or negative credit market conditions;
•the impact of outbreaks of communicable diseases such as the novel highly transmissible and pathogenic coronavirus (“COVID-19”) on business activity, the Company’s operations and national and global economic conditions, generally;
•hedging activities may prevent us from benefiting from price increases and may expose us to other risks;
•existing and future government laws, regulations and other legal requirements and judicial decisions that govern our business may increase our costs of doing business and may restrict our operations;

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•significant costs and liabilities may be incurred as a result of pipeline operations and related increase in the regulation of gas gathering pipelines;
•our ability to find adequate water sources for our use in shale gas drilling and production operations, or our ability to dispose of, transport or recycle water used or removed in connection with our gas operations at a reasonable cost and within applicable environmental rules;


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•failure to successfully estimate the rate of decline or existing reserves or to find or acquire economically recoverable natural gas reserves to replace our current natural gas reserves;
•risks associated with our debt;current long-term debt obligations;
•a decrease in our borrowing base, which could decrease for a variety of reasons including lower natural gas prices, declines in natural gas proved reserves, asset sales and lending requirements or regulations;
•changes in federal or state income tax laws;
•cyber-incidents could have a material adverse effect on our business, financial condition or results of operations;
•construction of new gathering, compression, dehydration, treating or other midstream assets by CNXM may not result in revenue increases and may be subject to regulatory, environmental, political, legal and economic risks;
•our success depends on key members of our management and our ability to attract and retain experienced technical and other professional personnel;
•terrorist activities could materially and adversely affect our business and results of operations;
•we may operate a portion of our business with one or more joint venture partners or in circumstances where we are not the operator, which may restrict our operational and corporate flexibility and we may not realize the benefits we expect to realize from a joint venture;
•acquisitions and divestitures, we anticipate may not occur or produce anticipated benefits;
•the outcomes of various legal proceedings, including those which are more fully described in our reports filed under the Exchange Act;
•there is no guarantee that we will continue to repurchase shares of our common stock under our current or any future share repurchase program at levels undertaken previously or at all;
•negative public perception regarding our industry could have an adverse effect on our operations;
•CONSOL Energy may not be able to satisfy its indemnification obligations in the future and such indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which CONSOL Energy will be allocated responsibility; and
the separation of CONSOL Energy could result in substantial tax liability; and
•other factors discussed in the Company's 2018 Annual Report onthis 2019 Form 10-K under “Risk Factors,” as updated by any subsequent Forms 10-Q, which are on file atwith the Securities and Exchange Commission.


ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In addition to the risks inherent in operations, CNX is exposed to financial, market, political and economic risks. The following discussion provides additional detail regarding CNX's exposure to the risks of changing commodity prices, interest rates and foreign exchange rates.

CNX is exposed to market price risk in the normal course of selling natural gas.gas and liquids. CNX uses fixed-price contracts, options and derivative commodity instruments to minimize exposure to market price volatility in the sale of natural gas. Under our risk management policy, it is not our intent to engage in derivative activities for speculative purposes.

CNX has established risk management policies and procedures to strengthen the internal control environment of the marketing of commodities produced from its asset base. All of the derivative instruments without other risk assessment procedures are held for purposes other than trading. They are used primarily to mitigate uncertainty and volatility and cover underlying exposures. The Company's market risk strategy incorporates fundamental risk management tools to assess market price risk and establish a framework in which management can maintain a portfolio of transactions within pre-defined risk parameters.

CNX believes that the use of derivative instruments, along with our risk assessment procedures and internal controls, mitigates our exposure to material risks. The use of derivative instruments without other risk assessment procedures could materially affect the Company's results of operations depending on market prices; however, we believe that use of these instruments will not have a material adverse effect on our financial position or liquidity due to our risk assessment procedures and internal controls.

For a summary of accounting policies related to derivative instruments, see Note 1—Significant Accounting Policies in the Notes to the Audited Consolidated Financial Statements in Item 8 of CNX's 20182019 Annual Report on Form 10-K.


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At September 30, 2019March 31, 2020 and December 31, 2018,2019, our open gas derivative instruments were in a net asset position with a fair value of $313$370 million and $99$406 million, respectively. A sensitivity analysis has been performed to determine the incremental effect on future earnings related to open derivative instruments at September 30, 2019March 31, 2020 and December 31, 2018.2019. A hypothetical 10 percent increase in future natural gas prices would have decreased the fair value by $411$376 million and $427$383 million at September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively. A hypothetical 10 percent decrease in future natural gas prices would have increased the fair value by $428$356 million and $453$402 million at September 30, 2019March 31, 2020 and December 31, 2018,2019, respectively.


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CNX's interest expense is sensitive to changes in the general level of interest rates in the United States. The Company uses derivative instruments to manage risk related to interest rates. At September 30, 2019March 31, 2020 and December 31, 2018,2019, CNX had $1,798$1,725 million and $1,703$1,797 million, respectively, aggregate principal amount of debt outstanding under fixed-rate instruments, including unamortized debt issuance costs of $10$8 million and $9 million, respectively. At September 30, 2019March 31, 2020 and December 31, 2018,2019, CNX had $859$949 million and $696$973 million, respectively, of debt outstanding under variable-rate instruments.instruments, including unamortized debt issuance costs of $8 million at March 31, 2020 . CNX’s primary exposure to market risk for changes in interest rates relates to our Credit Facility, under which there were $613$437 million of borrowings at September 30, 2019March 31, 2020 and $612$661 million at December 31, 2018, and2019, CNXM's revolving credit facility, under which there were $246$347 million of borrowings at September 30, 2019March 31, 2020 and $84$312 million at December 31, 2018.2019, and CNX's CSG Loan, under which there were $175 million of borrowings at March 31, 2020. A hypothetical 100 basis-point increase in the average rate for CNX's and CNXM's revolving credit facilitiesvariable-rate instruments would decrease pre-tax future earnings as of September 30, 2019March 31, 2020 and December 31, 20182019 by $9$10 million and $7 million, respectively, on an annualized basis.

All of the Company’s transactions are denominated in U.S. dollars and, as a result, it does not have material exposure to currency exchange-rate risks.

Natural Gas Hedging Volumes

As of October 9, 2019,April 21, 2020, our hedged volumes for the periods indicated are as follows:
For the Three Months Ended 
For the Three Months Ended   March 31,June 30,September 30,December 31,Total Year
March 31, June 30, September 30, December 31, Total Year
2019 Fixed Price Volumes         
Hedged BcfN/A N/A N/A 115.8
 115.8
Weighted Average Hedge Price per McfN/A N/A N/A $2.66
 $2.66
2020 Fixed Price Volumes         2020 Fixed Price Volumes
Hedged Bcf121.3
 123.6
 126.4
 121.5
 489.6*
Hedged BcfN/A114.5  104.7  118.0  337.2  
Weighted Average Hedge Price per Mcf$2.68
 $2.49
 $2.49
 $2.52
 $2.54
Weighted Average Hedge Price per McfN/A$2.53  $2.47  $2.53  $2.51  
2021 Fixed Price Volumes         2021 Fixed Price Volumes
Hedged Bcf104.5
 105.7
 106.9
 105.2
 422.3
Hedged Bcf114.4  112.6  114.0  111.2  449.2*  
Weighted Average Hedge Price per Mcf$2.40
 $2.40
 $2.40
 $2.39
 $2.40
Weighted Average Hedge Price per Mcf$2.49  $2.39  $2.39  $2.40  $2.41  
2022 Fixed Price Volumes         2022 Fixed Price Volumes
Hedged Bcf68.6
 69.3
 70.1
 70.1
 278.1
Hedged Bcf76.5  76.5  77.3  74.5  304.8  
Weighted Average Hedge Price per Mcf$2.45
 $2.45
 $2.45
 $2.43
 $2.44
Weighted Average Hedge Price per Mcf$2.32  $2.29  $2.29  $2.26  $2.29  
2023 Fixed Price Volumes         2023 Fixed Price Volumes
Hedged Bcf35.7
 36.1
 36.4
 36.4
 144.6
Hedged Bcf42.5  42.9  43.4  43.4  172.2  
Weighted Average Hedge Price per Mcf$2.28
 $2.28
 $2.28
 $2.28
 $2.28
Weighted Average Hedge Price per Mcf$2.27  $2.23  $2.23  $2.26  $2.25  
2024 Fixed Price Volumes         2024 Fixed Price Volumes
Hedged Bcf30.5
 30.6
 30.9
 30.9
 122.9
Hedged Bcf39.5  37.2  37.6  37.6  150.1*  
Weighted Average Hedge Price per Mcf$2.45
 $2.45
 $2.45
 $2.45
 $2.45
Weighted Average Hedge Price per Mcf$2.39  $2.31  $2.31  $2.31  $2.32  
2025 Fixed Price Volumes2025 Fixed Price Volumes
Hedged BcfHedged Bcf14.4  14.6  14.8  14.8  58.6  
Weighted Average Hedge Price per McfWeighted Average Hedge Price per Mcf$2.12  $2.12  $2.12  $2.12  $2.12  
*Quarterly volumes do not add to annual volumes inasmuch as a discrete condition in individual quarters, where basis hedge volumes exceed NYMEX hedge volumes, does not exist for the year taken as a whole.


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ITEM 4.CONTROLS AND PROCEDURES
ITEM 4.CONTROLS AND PROCEDURES

Disclosure controls and procedures. CNX, under the supervision and with the participation of its management, including CNX’s principal executive officer and principal financial officer, evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, CNX’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures are effective as of September 30, 2019March 31, 2020 to ensure that information required to be disclosed by CNX in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and includes controls and procedures designed to ensure that information required to be disclosed by CNX in such reports is accumulated and communicated to CNX’s management, including CNX’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.



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Changes in internal controls over financial reporting. There were no changes in the Company's internal controls over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II: OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS
ITEM 1.LEGAL PROCEEDINGS
The first paragraph of Note 13—10—Commitments and Contingent Liabilities in the Notes to the Unaudited Consolidated Financial Statements included in Item 1 of this Form 10-Q is incorporated herein by reference.

Environmental Proceedings

From time to time, CNX and the Pennsylvania Department of Environmental Protection ("PA DEP") enter into agreements regarding notices of violation issued by the PA DEP. With respect to the subsurface pressure anomaly experienced at one of our Utica wells in January 2019, CNX and the PA DEP are negotiating a consent assessment and civil penalty, which will be immaterial to CNX’s financial statements.

ITEM 1A.  RISK FACTORS
CNX is also subject to certainadditional risks and hazards due to the nature of the business activities it conducts. For a discussion of these risks, see “Item 1A. Risk Factors” in CNX's 20182019 Annual Report on Form 10-K as filed with the SEC on February 7, 10, 2020 ("2019 ("2018 Form 10-K"). The risks described in the 20182019 Form 10-K could materially and adversely affect CNX's business, financial condition, cash flows, and results of operations. ThereOther than as set forth below, there have been no additional material changes to the risks described in the 20182019 Form 10-K. CNX may experience additional risks and uncertainties not currently known; or, as a result of developments occurring in the future, conditions that are currently deemed to be immaterial may also materially and adversely affect CNX's business, financial condition, cash flows, and results of operations.

Events beyond our control, including a global or domestic health crisis, may result in unexpected adverse operating and financial results.

The recent outbreak of the coronavirus pandemic (COVID-19) has affected, and may materially and adversely affect, our business, operating and financial results and liquidity. The severity, magnitude and duration of the current COVID-19 outbreak is uncertain, rapidly changing and hard to predict. While the full impact of this virus and the long-term worldwide reaction to it and impact from it remains unknown at this time, government reaction to the pandemic and restrictions and limitations applied by the government as a result, continued widespread growth in infections, travel restrictions, quarantines, or site closures as a result of the virus could, among other things, impact the ability of our employees and contractors to perform their duties, cause increased technology and security risk due to extended and company-wide telecommuting, lead to disruptions in our supply chain (including necessary contractors), lead to a disruption in our resource acquisition or permitting activities and cause disruption in our relationship with our customers. Additionally, the COVID-19 outbreak has significantly impacted economic activity and markets around the world, and COVID-19 or another similar outbreak could negatively impact our business in numerous ways, including, but not limited to, the following:

•our revenue may be reduced if the outbreak results in an economic downturn or recession, as many experts predict, to the extent it leads to a prolonged decrease in the demand for natural gas and liquefied natural gas ("LNG") and, to a lesser extent, NGLs and oil;

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•our operations may be disrupted or impaired, thus lowering our production level, if a significant portion of our employees or contractors are unable to work due to illness or if our field operations are suspended or temporarily shut-down or restricted due to control measures designed to contain the outbreak;
•the operations of our midstream service providers, on whom we rely for the transmission, gathering and processing of a significant portion of our produced natural gas, NGLs and oil, may be disrupted or suspended in response to containing the outbreak, and/or the difficult economic environment may lead to the bankruptcy or closing of the facilities and infrastructure of our midstream service providers, which may result in substantial discounts in the prices we receive for our produced natural gas, NGLs and oil or result in the shut-in of producing wells or the delay or discontinuance of development plans for our properties; and
•the disruption and instability in the financial markets and the uncertainty in the general business environment may affect our ability to find attractive asset monetization opportunities and successfully execute our plan to deleverage our business on the timeframe previously anticipated or at all; for example, the market value of the assets to be monetized may be reduced and the financial condition or prospects of prospective purchasers and other counterparties, and such parties’ access to financing on acceptable terms, may be adversely affected.

In addition, the COVID-19 pandemic has increased volatility and caused negative pressure in the capital and credit markets. As a result, we may experience difficulty accessing the capital or financing needed to fund our exploration and production operations, which have substantial capital requirements, or refinance our upcoming maturities on satisfactory terms or at all. We typically fund our capital expenditures with existing cash and cash generated by operations (which is subject to a number of variables, including many beyond our control) and, to the extent our capital expenditures exceed our cash resources, from borrowings under our revolving credit facility and other external sources of capital, we could be required to curtail our operations and the development of our properties, which in turn could lead to a decline in our reserves and production, and could adversely affect our business, results of operations and financial position.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks set forth in Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, such as those relating to our financial performance and debt obligations. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on our business, which will depend on numerous evolving factors and future developments that we are not able to predict, including the length of time that the pandemic continues, its effect on the demand for natural gas, LNG, NGLs and oil, the response of the overall economy and the financial markets as well as the effect of governmental actions taken in response to the pandemic.demand for our products. Any of these outcomes could have a material adverse effect on our business, operations, financial results and liquidity.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth repurchasesThere were no issuer purchases of our common stock duringequity securities in the three months ended Septemberfirst quarter of fiscal year 2020. Since the October 30, 2019:
ISSUER PURCHASES OF EQUITY SECURITIES
 (a)(b)(c)(d)
Period
Total Number of Shares Purchased (1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (000's omitted)
July 1, 2019-
July 31, 2019		—
$—
—
$156,143
August 1, 2019-
August 31, 2019		—
$—
—
$156,143
September 1, 2019-
September 30, 2019		1,000,000
$7.68
1,000,000
$148,466
Total1,000,000
   
(1) Includes shares withheld from employees to satisfy minimum tax withholding obligations associated with the vesting of restricted stock during the period.
(2) Shares repurchased as part2017 inception of the Company’s current $750 million sharestock repurchase program, authorized by theCNX's Board of Directors on October 30, 2017has approved a $750 million stock repurchase program, which is not subject to an expiration date. As of March 31, 2020, approximately $148.5 million remained available under the stock repurchase program. The stock repurchase program does not obligate the Company to repurchase any dollar amount or number of shares and subsequently amended from time to time (Seethe Board may modify, suspend, or discontinue its authorization of the program at any time. See Note 1815 - Stock Repurchase in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for more information), which is not subjectinformation.

See Part III. Item 12. "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" included in CNX Resources Corporation's Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC) on February 10, 2020 for information relating to an expiration date.CNX's equity compensation plans.


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ITEM 6.EXHIBITS
ITEM 6.EXHIBITS
10.1*10.1 
Change in Control SeveranceExchange Agreement, dated October 28, 2019, between theas of January 29, 2020, by and among CNX Midstream Partners LP, CNX Midstream GP LLC and CNX Gas Company and Chad A. Griffith.LLC (incorporated by reference to Form 8-K (file number 20710898) filed on January 30, 2020)


10.2*31.1* 
Change in Control Severance Agreement, dated October 28, 2019, between the Company and Olayemi Akinkugbe.

31.1*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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.
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.
101.INS
XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH*
XBRL Taxonomy Extension Schema Document.
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*
XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document.
* Filed herewith

In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.


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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: October 29, 2019April 27, 2020
 
CNX RESOURCES CORPORATION
CNX RESOURCES CORPORATION
By: 
By: 
/s/S/  NICHOLAS J. DEIULIIS    
Nicholas J. DeIuliis
Director, Chief Executive Officer and President

(Duly Authorized Officer and Principal Executive Officer)
By: 
/S/    DONALD W. RUSH    
Donald W. Rush
Chief Financial Officer and Executive Vice President

(Duly Authorized Officer and Principal Financial Officer)
By: 
/S/    JASON L. MUMFORDALAN K. SHEPARD 
Jason L. MumfordAlan K. Shepard
Chief Accounting Officer and Vice President

(Duly Authorized Officer and Principal Accounting Officer)
By:
/S/    JASON L. MUMFORD
Jason L. Mumford
Vice President and Controller


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