Q1 2020 Earnings Call

May 11, 2020

Good day, ladies and gentlemen, and welcome to the C E X and see our first quarter 2020 earnings conference call, all participants will be and they listen only mode.

Operator 3: Good day, ladies and gentlemen, and welcome to the CEIX and CCR Q1 2020 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone at any time. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Nathan Tucker, Manager of Finance and Investor Relations. Please proceed, sir.

Operator: Good day, ladies and gentlemen, and welcome to the CEIX and CCR Q1 2020 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone at any time. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Nathan Tucker, Manager of Finance and Investor Relations. Please proceed, sir.

Do you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone at any time to withdraw. Your question. Please press Star then too. Please note today's event is being recorded I would now like to turn the conference over to Nathan Talker manager a finance.

An investor Relations. Please proceed sir.

Thank you Eric and good morning, everyone welcome to Consol energy and consult coal resources first quarter 2020 earnings conference call any forward looking statements or comments, we make about future expectations, our shop subject to some risks, which we've outlined in our press releases were interested to see filings and are considered forward looking statements within.

Nathan Tucker: Thank you, Eric, and good morning everyone. Welcome to CONSOL Energy and CONSOL Coal Resources Q1 2020 earnings conference call. Any forward-looking statements or comments we make about future expectations are subject to some risks, which we have outlined in our press releases or in our SEC filings and are considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. We did not undertake any obligations of updating any forward-looking statements for future events or otherwise. We will also be discussing certain non-GAAP financial measures which are defined and reconciled to comparable GAAP financial measures in our press releases and furnished to the SEC on Form 8-K. You can also find additional information on our website www.consolenergy.com and www.ccrlp.com.

The meaning of section 20, Onee Other Securities Exchange Act of 1934, we did not undertake any obligations of updating any forward looking statements for future events or otherwise.

We will also be discussing certain non-GAAP financial measures, which are defined and reconciled to comparable GAAP financial measures in our press releases and furnished to the FCC on form 8-K.

You can also find additional information on our website www dot Consol energy Dot com and Www Dot CCR LP Dot com.

Nathan Tucker: On the call with me today are Jimmy Brock, our Chief Executive Officer, Mitesh Thakkar, our Interim Chief Financial Officer, and Jim McCaffrey, our Chief Commercial Officer. In his prepared remarks, Jimmy will provide a recap of our key achievements during Q1 2020, specific insights on marketing and operations, and our response to the COVID-19 pandemic. Mitesh will then provide an update on our liability management program, financial results, our cost reduction efforts, and outlook for 2020. During the prepared remarks, we will refer to certain slides that were posted on our websites in advance of today's call. After the prepared remarks, there will be a Q&A session in which all three executives will participate. With that, let me turn it over to our CEO, Jimmy Brock.

On the call with me today, our Jimmy Brock, our Chief Executive Officer, Matuschka car or interim Chief Financial Officer, and Jim Mccaffrey, Our Chief commercial officer in his prepared remarks, Jimmy will provide a recap of our key achievements during the first quarter of 2020 specific insights on marketing and operations and our response to the cobot 19 pandemic Mattel.

I will then provide an update on our liability management program financial results, our cost reduction efforts and outlook for 2020 during their prepared remarks, we will refer to certain slides posted on our web sites in advance of today's call.

After their prepared remarks, there will be a QNX session in which all three executives will participate with that let me turn it over to our CEO Jimmy Brock.

James Brock: Thank you, Nate, and good morning, everyone. As we all know, these are unprecedented times we are navigating through. Thus far, 2020 has been very challenging for our industry and the world. We have seen significant declines in energy demand and have faced many uncertainties. First, due to a warmer than normal winter and most recently due to the economic slowdown brought on by the COVID-19 pandemic. The widespread government-imposed shutdown of businesses has resulted in reduced electricity demand both domestically and abroad, which has weighed on our customers' ability to burn coal. Before I go any further, let me be clear, ensuring the safety, health, and well-being of our employees and their loved ones is paramount. The world has changed significantly in the last few months, and all of us have to adapt to this new reality.

Jimmy Brock: Thank you, Nate, and good morning, everyone. As we all know, these are unprecedented times we are navigating through. Thus far, 2020 has been very challenging for our industry and the world. We have seen significant declines in energy demand and have faced many uncertainties. First, due to a warmer than normal winter and most recently due to the economic slowdown brought on by the COVID-19 pandemic. The widespread government-imposed shutdown of businesses has resulted in reduced electricity demand both domestically and abroad, which has weighed on our customers' ability to burn coal. Before I go any further, let me be clear, ensuring the safety, health, and well-being of our employees and their loved ones is paramount. The world has changed significantly in the last few months, and all of us have to adapt to this new reality.

Thank you night and good morning, everyone.

As we all know these are unprecedented times, we're navigating through.

Thus far 2020 has been very challenging for our industry and the world.

We have seen significant declines in energy demand and have faced many uncertainties first due to warmer than normal winter and most recently due to the economic slowdown brought on by the cold, but not team pandemic.

The widespread government imposed shutdown of businesses has resulted in reduced electricity demand, both domestically and abroad, which is weighed on our customers' ability to burn coal.

Before I go any further let me be clear, ensuring the safety health and well be antibody employees and their loved ones is paramount.

The World has changed significantly in the last few months and all of us have to adapt to this new reality.

James Brock: I am proud of the CONSOL team and the way they responded to this pandemic. We also know that being classified as an essential business comes with a lot of responsibility and pride. Our frontline employees who mine the coal that ensures an uninterrupted power supply during this time of need embrace the challenge. We have adopted enhanced sanitizing and social distancing measures at our operations and implementing staggered shifts at our mine sites. Our corporate employees continue to support our operations very effectively while coordinating and collaborating remotely to support government efforts to restrict the spread of the disease. I am very thankful to the entire CONSOL team as they continue to excel in these challenging times.

Jimmy Brock: I am proud of the CONSOL team and the way they responded to this pandemic. We also know that being classified as an essential business comes with a lot of responsibility and pride. Our frontline employees who mine the coal that ensures an uninterrupted power supply during this time of need embrace the challenge. We have adopted enhanced sanitizing and social distancing measures at our operations and implementing staggered shifts at our mine sites. Our corporate employees continue to support our operations very effectively while coordinating and collaborating remotely to support government efforts to restrict the spread of the disease. I am very thankful to the entire CONSOL team as they continue to excel in these challenging times.

I am proud of the consulting and the way they responded to this pandemic.

We also know that being classified as an essential business comes with a lot of responsibility and pride.

Our frontline employees, who mind the coal that in shares an uninterrupted power supply during this time, a neat embraced the challenge.

We have adopted enhance sanitizing, and social disgusting measures and our operations and implemented staggered shifts and our mindset.

Our corporate employees continue to support our operations very effect.

Well coordinated and collaborating remotely to support government efforts to restrict the spread of the disease.

I'm very thankful to the entire consol team as they continue to excel and these challenging times.

James Brock: We will continue to monitor the risks posed by the COVID-19 pandemic and will take any additional steps that we deem necessary to keep our employees, their families, and the community safe. Before I dive into operations and marketing details, let me now provide a brief recap of the quarter. Despite the significant demand decline, we achieved several important goals during Q1. On the safety front, we delivered a very strong safety performance with our Harvey Mine, Bailey Preparation Plant, CONSOL Marine Terminal, and Itmann project each having zero recordable incidents. On the operations and marketing fronts, even while we face several headwinds and reduced demand from our customers, our strong contracted position and operational flexibility softened the impacts of these declining market conditions.

Jimmy Brock: We will continue to monitor the risks posed by the COVID-19 pandemic and will take any additional steps that we deem necessary to keep our employees, their families, and the community safe. Before I dive into operations and marketing details, let me now provide a brief recap of the quarter. Despite the significant demand decline, we achieved several important goals during Q1. On the safety front, we delivered a very strong safety performance with our Harvey Mine, Bailey Preparation Plant, CONSOL Marine Terminal, and Itmann project each having zero recordable incidents. On the operations and marketing fronts, even while we face several headwinds and reduced demand from our customers, our strong contracted position and operational flexibility softened the impacts of these declining market conditions.

We will continue to monitor the risk posed by the cobot not team pandemic and we're taking additional steps that we deem necessary to keep our employees their families and the community sake.

Before I dive into operation marketing, New Telx, Let me now provide a brief recap of the quarter.

Despite the significant demand decline, we achieved several important goals during the first quarter.

On the safety front, we delivered a very strong safety performance with our Harvey mine.

The preparation plant Consol, Maureen terminal and hitting on project, each having zero recordable incidents.

On the operation and marketing fronts.

Even while we faced several headwinds and reduced demand from our customers are strong contracted position and operational flexibility soften the impact of these declining market conditions.

James Brock: We drew upon the tremendous partnerships we have with our customers and continued to identify creative solutions to help navigate this extremely challenging situation. On the financial front, we completed a number of transactions during the quarter, which reduced our outstanding debt, improved liquidity, and enhanced our financial flexibility. Mitesh will discuss these in more detail shortly. Now, let me review our Q1 operational performance. Coal production at the Pennsylvania Mining Complex decreased to 6 million tons in Q1 of 2020, compared to 6.8 million tons in the year-ago quarter. The decline was mainly due to the aforementioned reduction in customer demand and a corresponding reduction in operating days as we sought to match production with demand.

Jimmy Brock: We drew upon the tremendous partnerships we have with our customers and continued to identify creative solutions to help navigate this extremely challenging situation. On the financial front, we completed a number of transactions during the quarter, which reduced our outstanding debt, improved liquidity, and enhanced our financial flexibility. Mitesh will discuss these in more detail shortly. Now, let me review our Q1 operational performance. Coal production at the Pennsylvania Mining Complex decreased to 6 million tons in Q1 of 2020, compared to 6.8 million tons in the year-ago quarter. The decline was mainly due to the aforementioned reduction in customer demand and a corresponding reduction in operating days as we sought to match production with demand.

We grew up on the tremendous partnerships, we have with our customers and continued to identify creative solutions to help navigate this extremely challenging situation.

On the financial front, we completed a number of transactions during the quarter, which reduced our outstanding debt and preserve liquidity and enhanced our financial flexibility, but test will discuss these in more detail shortly.

Now, let me review, our first quarter operation performance.

Co production that the Pennsylvania mining complex decreased to 6 million tons in Q1 at 20 compared to 6.8 million tons into your go quarter.

The decline was mainly due to the April mentioned reduction in customer demand and a corresponding reduction in operating days as we start to match production with the man.

James Brock: For its share of the Pennsylvania Mining Complex, CCR produced 1.5 million tons of coal during Q1 of 2020, compared to 1.7 million tons in the year ago quarter. On the cost front, our average cash cost of coal sold per ton was $32.41 in Q1 of 2020, compared to $29.71 in Q1 of 2019. The per ton increase was largely driven by the decline in the production volumes, and higher subsidence-related costs at our Enlow Fork Mine. The CONSOL Marine Terminal had a throughput volume of 3.4 million tons during the quarter, compared to 4 million tons in the year ago period.

Jimmy Brock: For its share of the Pennsylvania Mining Complex, CCR produced 1.5 million tons of coal during Q1 of 2020, compared to 1.7 million tons in the year ago quarter. On the cost front, our average cash cost of coal sold per ton was $32.41 in Q1 of 2020, compared to $29.71 in Q1 of 2019. The per ton increase was largely driven by the decline in the production volumes, and higher subsidence-related costs at our Enlow Fork Mine. The CONSOL Marine Terminal had a throughput volume of 3.4 million tons during the quarter, compared to 4 million tons in the year ago period.

For its share of the Pennsylvania mine and complex CCR produced 1.5 million tons of Cogen Q1 of the 20.

Paired to 1.7 million times, and a year ago quarter.

On the cost from.

Our average cash cost of course overtime was $32.41 in Q1 or 20 compared to $29.71 in Q1, if not team.

Proton increase was largely driven by the decline in the production volumes and higher subsidence related cost at or Enlow Fork mine.

The consortium rain terminal added throughput volume of 3.4 million times during the quarter compared to 4 million tons in the year, though period.

James Brock: Given the terms of our take-or-pay contract at the terminal and despite a decline in shipments, our terminal revenues for the quarter were only modestly impaired at $16.5 million, compared to $17.8 million in the year ago quarter. However, cash operating costs were slightly improved at $5.2 million, versus $5.6 million in the year ago period. I am pleased to announce that our Itmann project mined its first cut of coal and shipped product to a third party processor in early April. We remain very excited about this project, and even though we've slowed down the pace, we've been successful in proceeding with development mining at a controlled level of net expenditures. This gives us the flexibility to ramp up the project back up at our discretion in the future when market conditions warrant.

Jimmy Brock: Given the terms of our take-or-pay contract at the terminal and despite a decline in shipments, our terminal revenues for the quarter were only modestly impaired at $16.5 million, compared to $17.8 million in the year ago quarter. However, cash operating costs were slightly improved at $5.2 million, versus $5.6 million in the year ago period. I am pleased to announce that our Itmann project mined its first cut of coal and shipped product to a third party processor in early April. We remain very excited about this project, and even though we've slowed down the pace, we've been successful in proceeding with development mining at a controlled level of net expenditures. This gives us the flexibility to ramp up the project back up at our discretion in the future when market conditions warrant.

Given the terms of our take or pay contract at the terminal and despite a decline in shipment our terminal revenues for the quarter were only modestly impaired at 16.5 million compared to 17.8 million new year, though quarter.

However, cash operating costs were slightly improved 5.2 million versus 5.6 man and the year, though period.

I am pleased to announce that are it meant project mind, its first kind of coal and ship product to a third party processor in early April.

We remain very excited about this project and even though we've slowed down the pace we've been successful in proceeding with development mining and they controlled level of net expenditures.

This gives us the flexibility to ramp up the project back up at our discretion in a future when market conditions warrant.

James Brock: Let me now provide an overview of the coal markets and an update on our sales performance and accomplishments. This was a challenging quarter for coal markets to say the least. Coal demand was first impacted due to a mild winter and low natural gas prices, and then was impacted as a result of the government-imposed shutdowns of non-essential businesses. On the power price front, average PJM West day ahead power prices were 33% lower in Q1 2020 compared to Q1 2019, and more than 50% below the Q1 2018 levels, which helps to illustrate the severity of the decline. For the most part, our power price link contracts were yielding realizations at their contractual floors. Henry Hub natural gas prices averaged $1.90 per MMBTU during the quarter, which was down 35% compared to Q1 2019.

Jimmy Brock: Let me now provide an overview of the coal markets and an update on our sales performance and accomplishments. This was a challenging quarter for coal markets to say the least. Coal demand was first impacted due to a mild winter and low natural gas prices, and then was impacted as a result of the government-imposed shutdowns of non-essential businesses. On the power price front, average PJM West day ahead power prices were 33% lower in Q1 2020 compared to Q1 2019, and more than 50% below the Q1 2018 levels, which helps to illustrate the severity of the decline. For the most part, our power price link contracts were yielding realizations at their contractual floors. Henry Hub natural gas prices averaged $1.90 per MMBTU during the quarter, which was down 35% compared to Q1 2019.

Let me now provide an overview of the coal markets and an update on our sales performance and accomplishments.

This was a challenging quarter for coal markets to say the least.

Coal demand was first impacted due to a mild winter and low natural gas prices and Dan was impacted as a result of the government imposed shutdowns of non essential businesses.

On the power price front average PJM west they had power prices were 30, 33% lower in Q1, a 20 compared to Q1, if not team and more than 50% below the Q1 18 levels, which helps to illustrate the severity of the decline.

For the most part our pair price linked contracts will yield and realizations at their contractual floors.

And we have natural gas price averaged a dollar and 90 cents per M. B to you during the quarter, which was down 35% compared to Q1, if not team.

James Brock: These low natural gas prices amid a significant overall demand decline resulted in substantial coal to gas switching in the US, which in turn led to increased coal inventories for our customers. This all translated into reduced demand for our coal and led us to complete several contract buyouts in the quarter as we sought to help our customers manage their inventory levels. These contract buyouts involved the negotiations of early terminations of several customer contracts in exchange for payment of certain fees to us during Q1 2020, which contributed $10.8 million to our miscellaneous other income. On the export front, international thermal coal prices have been in decline since the start of 2019 due to a pullback in global LNG prices and now due to the global COVID-19 related shutdowns.

Jimmy Brock: These low natural gas prices amid a significant overall demand decline resulted in substantial coal to gas switching in the US, which in turn led to increased coal inventories for our customers. This all translated into reduced demand for our coal and led us to complete several contract buyouts in the quarter as we sought to help our customers manage their inventory levels. These contract buyouts involved the negotiations of early terminations of several customer contracts in exchange for payment of certain fees to us during Q1 2020, which contributed $10.8 million to our miscellaneous other income. On the export front, international thermal coal prices have been in decline since the start of 2019 due to a pullback in global LNG prices and now due to the global COVID-19 related shutdowns.

These low natural gas prices amid a significant overall demand decline resulted in substantial coal to gas switching and the U.S., which in turn led to increased coal inventories for our customers.

This all translated into reduced demand for our coal and led us to complete several contract buyouts in the quarter as we sell to help our customers manage their inventory levels.

These contract buyouts in bother negotiations of early termination of several customer contracts in exchange for payment of certain phase to us during the first quarter 2020.

Which contributed $10.8 million to our miscellaneous other income.

On the export front.

International thermal coal prices have been in decline since the start of 20 not team due to a pullback in global LNG prices and now due to the global covert not pain related shutdowns.

James Brock: However, as a result of this unprecedented demand decline and low prices, we believe that the global supply rationalization will be forced upon the industry. As you can see on slide seven of the supplementary slide deck that we posted to our websites this morning, Wood Mackenzie estimates that at current spot prices, 36% of seaborne coal supply is at high risk of curtailment. The majority of this is thermal coal. With estimates of 400 million tons of high-risk production globally, we believe this could help to tighten the market as we move forward. From a marketing perspective, we continue to maintain 100% of our existing customer base and continue to find opportunities to selectively grow and capture market share in the export markets.

Jimmy Brock: However, as a result of this unprecedented demand decline and low prices, we believe that the global supply rationalization will be forced upon the industry. As you can see on slide seven of the supplementary slide deck that we posted to our websites this morning, Wood Mackenzie estimates that at current spot prices, 36% of seaborne coal supply is at high risk of curtailment. The majority of this is thermal coal. With estimates of 400 million tons of high-risk production globally, we believe this could help to tighten the market as we move forward. From a marketing perspective, we continue to maintain 100% of our existing customer base and continue to find opportunities to selectively grow and capture market share in the export markets.

However, as a result of this unprecedented demand decline in low prices, we believe that to global supply rationalization will be forced upon the energy industry.

As you can see on slide seven of the supplemental slide that we posted to our websites. This morning.

Wood Mackenzie estimates that at current spot prices, 36% of seaborne coal supply is at high risk of curtailment.

The majority of this is thermal coal.

With estimates of 440 million tons of high risk production globally. We believe this could have to tighten the market as we move forward.

From a marketing perspective, we continue to maintain 100% of our existing customer base and continue to find opportunities to selectively grow and capture market share and export markets.

James Brock: We announced this morning that our customer, XCoal, recently won a contract to supply 1.8 million tons of coal to the Punta Catalina power plant in the Dominican Republic. To fulfill that contract, XCoal increased the volume of tons to be acquired under a supply contract with us. In aggregate, we are now contracted for 10+ million export tons in 2020. While we do not like the prices that we're seeing in the current market, we will generate cash margins on these new tons and will hopefully gain a long-term end user for our coal. While we are mostly contracted for 2020, we have some more work to do for our volumes in 2021 and beyond. Despite our strong contracted position, we do face significant uncertainties given the unpredictable nature of the COVID-19 pandemic and the resulting economic slowdown.

Jimmy Brock: We announced this morning that our customer, XCoal, recently won a contract to supply 1.8 million tons of coal to the Punta Catalina power plant in the Dominican Republic. To fulfill that contract, XCoal increased the volume of tons to be acquired under a supply contract with us. In aggregate, we are now contracted for 10+ million export tons in 2020. While we do not like the prices that we're seeing in the current market, we will generate cash margins on these new tons and will hopefully gain a long-term end user for our coal. While we are mostly contracted for 2020, we have some more work to do for our volumes in 2021 and beyond. Despite our strong contracted position, we do face significant uncertainties given the unpredictable nature of the COVID-19 pandemic and the resulting economic slowdown.

We announced this morning that our customer Exco recently won a contract to supply 1.8 million tons of coal to the pulling the Catalina power plant and the Dominican Republic.

To fulfill that contract exco increased the volume of tons to be acquired under a supply contract with us.

In aggregate.

We are now contracted for 10 plus million export tons in 2020.

While we do not locked the prices that were sand in the current market, we will generate cash margins on these new tons and we'll hopefully gain a long term end user for coal.

Well were mostly contracted for 2020, we have some more work to do for our volumes in 2021 and beyond.

Despite our strong contracted position, we do face significant uncertainty is given the unpredictable nature of the cobot not team pandemic and the resulting economic slowdown.

James Brock: As always, we will work together with our customers to help them manage the contractual obligations that we both have. With that, I will now turn the call over to Mitesh to provide the financial update.

Jimmy Brock: As always, we will work together with our customers to help them manage the contractual obligations that we both have. With that, I will now turn the call over to Mitesh to provide the financial update.

As always.

We will work together with our customers to help them manage the contractual obligations that we both have.

With that I'll now turn the call over time attached to provide the financial update.

Mitesh Thakkar: Thank you, Jimmy, and good morning, everyone. Let me start with an update on our liability management efforts in the context of our capital allocation strategy. I will then review our financial results for Q1 2020 and touch upon our cost management efforts and 2020 outlook. As we stated on our last earnings call, our top priority heading into 2020 was to remain laser focused on improving the risk profile of our balance sheet by reducing our outstanding debt and creating long-term value for our CEIX shareholders and CCR unit holders. I'm pleased to inform you that we believe we have gotten off to a good start in Q1 2020. For CEIX, we retired $53 million worth of our outstanding debt in Q1 2020.

Thank you Jimmy and good morning, everyone.

Let me start with an update on our liability management to float in the context about capital allocation strategy. I will then review our financial results for 120 and touch up on our cost management to focus on 2020 outlook.

As we stated on our last earnings call our top priority heading into Twentytwenty Wall Street remain laser focused on improving the risk profile of our balance sheet by reducing our outstanding debt and creating long term value for us see shareholders NCC all unitholders.

Im pleased to inform you that we believe we have gotten off to a good step in 120.

Foresee.

We did talk $53 million was up on outstanding debt in the fourth quarter off Twentytwenty. Most meaningfully spent less than 26 million to repurchase approximately 43 million of our second lien debt as it continued to trade at a significant discount to spot.

Mitesh Thakkar: Most meaningfully, we spent less than $26 million to repurchase approximately $43 million of our second lien debt as it continued to trade at a significant discount to its par value. To put that number in perspective, we repurchased approximately $53 million of our second lien debt in the entire year of 2019. These discounted second lien repurchases provided a high rate of return, and were extremely accretive to our equity holders. As we have stated in the past, our goal is to have a significantly lower level of absolute debt before our 2024 term loan B matures, and this debt reduction during Q1 was another big step towards that goal.

What that number in perspective, we repurchased approximately 53 million off our second lien debt in the entity off 2019.

These discounted second lien repurchases as the why did a hydrocodone and we invent extremely accretive to our equity holders.

As we've stated in the past our goal is to have a significantly lower level of absolute debt before documented ready for term loan b matures and this debt reduction during the fourth quarter was another big step towards that goal.

Mitesh Thakkar: We recognize that our financial securities are very volatile, and as a result, we intend to spread our purchases out over time and take advantage of dollar cost averaging. We also recognize that liquidity is very important during these uncertain times. In spite of deploying a significant amount of capital buying back our debt, we still ended the quarter with a cash balance and liquidity that were in line with the beginning of the Q1. To achieve this, we completed multiple transactions during the quarter to provide additional sources of low-cost capital and to improve financial flexibility, despite a decline in Organic Free Cash Flow versus the prior year period. First, we closed the finance lease transaction on a set of longwall shearers which provided net cash proceeds of $16.3 million at an interest rate of approximately 5.6%.

We recognized that our financial securities on very volatile and as a result, we intend to spread approaches is out there what time and take advantage of dollar cost average.

We also recognize that liquidity is very important during these uncertain times.

In spite of the black deploying a significant amount of capital buying back our debt. We still ended the quarter with the cash balance and liquidity that we had in mind the beginning of the first quarter.

To achieve this to be completed multiple transactions during the quarter to provide additional sources of low cost capital and to improve financial flexibility. Despite a decline in organic free cash flow versus the prior year BT.

Well, we closed the finance lease transaction on a set of long Washington's which provided net cash proceeds of 16.3 million at an interest rate of approximately 5.6%.

Mitesh Thakkar: Second, we secured a commitment to provide an additional $20 million for future equipment financing needs. Finally, we successfully amended and extended the term of our accounts receivable securitization program, extending the maturity to March 2023 from August 2021, while keeping the size of the facility unchanged. Last quarter, we also indicated that improving our net accounts receivable outstanding was one of our priorities for 2020. During Q1, we had some success on that front as well. Our trade accounts receivable had declined to $113 million at the close of 31 March 2020, from $132 million at the close of 31 December 2019. While current market conditions are acting as a headwind in this process, we believe we will continue to make slow and steady progress towards normalizing our accounts receivable conversion cycle. Let me now discuss CCR.

Second we secured a commitment to provide an additional 20 million for future equipment financing needs.

Finally, we successfully amended and extended the normal thought accounts receivable securitization program extending the majority to March 2023 from August 2021, while keeping the size of the facility unchanged.

Last quarter.

We also indicated that improving our net accounts receivable outstanding was one of our priorities for 20 point during the fourth quarter you have some success on that front thats well our trade accounts receivable have declined $113 million. The close of March 31st or any money from 132 million at the close of December 30, plus 29.

While current market conditions are acting as a headwind in this process. We believe we'll continue to make slow and steady progress towards normalizing our accounts receivable to moazzam cycle.

Let me now discuss CCR.

Mitesh Thakkar: On 24 April, CCR announced that its board of directors has made the decision to temporarily suspend its cash distribution to all unit holders. While painful, we believe this was a necessary step for several reasons. First, the uncertainty created by the COVID-19 pandemic-related demand decline resulted in significant earnings decline for CCR. We started seeing it in Q1, and we expect it to continue through at least Q2 and potentially the rest of the year. Accordingly, we believe it is prudent to manage our cash flows, leverage ratios, and liquidity to ensure the maximum financial flexibility possible. This distribution suspension helps CCR conserve approximately $14 million of cash every quarter. On the trade receivables front, CCR, like CEIX, had similar success and ended the quarter with $28 million in trade receivables compared to $33 million at the beginning of the quarter.

On April 24th CCR announced that its board of directors has made the decision.

To temporarily suspend its gas distribution to all unitholders.

While painful we believe this was a necessary step for several reasons first uncertainty created by the organized in pandemic related demand decline resulted in significant earnings decline for CCR.

We started seeing it in the fourth quarter and we expected to continue to at least the second quarter and potentially the rest of the.

Accordingly, we believe it is proven to manage our cash flows leverage ratios and liquidity to ensure the maximum financial flexibility possible.

This distribution suspension helps CCR comes out.

Approximately 14 million of cash every quarter.

On the trade receivables front CCR like SIIA had similar success and ended the quarter with 28 million in trade receivables compared to 33 million at the beginning of the quarter.

Mitesh Thakkar: With that, let me now recap our Q1 2020 results. We'll review CEIX first, then CCR. CEIX reported Q1 2020 net income attributable to CEIX shareholders of $2.4 million, or $0.09 per diluted share, compared to $14.4 million or $0.52 per diluted share in Q1 2019. CEIX also reported Q1 2020 adjusted EBITDA of $62.9 million and organic free cash flow of $24.2 million, which compared to $118.5 million and $48 million respectively in the year-ago quarter. The decline in our earnings metrics compared to the year-ago period is mostly the result of lower PJM power prices, coal export prices, and the reduction in volumes that Jimmy previously discussed.

With that let me now recap our first quarter 2020 results will review CIA exposed than CCR.

Reported fourth quarter 220, net income attributable to CEOC shareholders of 2.4 million or nine cents per diluted share compared to 14.4 million of 52 cents per diluted share in one krwninety.

CX also reported 120, adjusted EBITDA of $62.9 million, an organic free cash flow 24.2 million, which compared to 118.5 million and 48 million respectively in the owner.

The decline in our earnings metrics compared to the Yoigo period is mostly the result of lower PJM power prices.

And coal export prices and the reduction in volumes that Jimmy previously discussed.

Mitesh Thakkar: In Q1 2020, we generated $51.4 million of cash flow from operations and spent $27.2 million in capital expenditures. As a result, CEIX generated $24.2 million in Organic Free Cash Flow. Our cash flow from operations included a modest working capital improvement of $2.1 million. Now let me update you on CCR. This morning, CCR reported net income of $0.2 million, Adjusted EBITDA of $14.4 million, and distributable cash flow of $3.5 million for Q1. This compares to $15.2 million, $28.2 million, and $17.3 million respectively in the year-ago quarter. In Q1 2020, CCR generated $16.8 million in net cash from operating activities, which includes $4.5 million improvement in working capital.

In one to 20, we generated 51.4 million of cash flow from operations and spent 27.2 million in capital expenditures as a result to see extended at 24.2 million in organic free cash flow.

Cash flow from operations included a modest working capital improvement of 2.1 million now let me update you on CCR.

This morning, CCR reported net income of 5.2 million adjusted EBITDA 14.4 million and distributable cash flow 3.5 million for the first quarter.

This compares to 15.2 million 28.2 million and $17.3 million, respectively in the year to low quarter.

In one case Rtwenty CCR generated 16.8 million in net cash from operating activities, which includes 4.5 million improvement in working capital.

Mitesh Thakkar: After accounting for $5.2 million in capital expenditures, $14.4 million in distribution payments, and proceeds from the shield lease financing transactions, we were able to hold our outstanding debt on the intercompany loan with CEIX flat compared to year-end 2019. Nonetheless, due to the reduction in the trailing twelve-month EBITDA, CCR finished the quarter with a net leverage ratio of 2.2 times. Now let me move on to providing some color on what we expect for the remainder of 2020. We typically provide you with quantitative guidance around our sales, revenue, cost, and EBITDA expectations. However, given the difficulty in forecasting the duration and uncertainty of the COVID-19 pandemic and the resulting economic slowdown and energy demand decline, our 2020 guidance remains suspended for the quarter. As we gain more visibility around demand recovery, we expect to resume some quantitative guidance.

After accounting for 5.2 million in capital expenditures 14.4 million in distribution payments and proceeds from the sheer that lease financing transactions, we were able to all outstanding debt.

On the intercompany loan would see flat compared to year end 2019.

Nonetheless, due to the reduction in the trailing 12 month EBITDA CCR finished the quarter with a net leverage ratio of 2.2 times.

Now, let me move on to providing some color on what we expect for the remainder of Twentytwenty.

But typically provide you with quantitative guidance around our sales revenue cost in the expectations.

However, given the difficult in forecasting the duration and uncertainty of the coordinated in pandemic and the resulting economic slowdown in energy demand decline.

20 for any guidance remain suspended for the quarter.

As we gain more visibility around demand recovery, we expect to resume some quantitative guidance in the meantime, let me provide some color that could help analysts and investors from a modeling standpoint.

Mitesh Thakkar: In the meantime, let me provide some color that could help analysts and investors from a modeling standpoint. On the production side, the mines are ready to run, but we will remain sales driven. Even though we have 25+ million tons contracted for 2020, the timing of shipments and the magnitude of contract buyouts will dictate the ultimate sales and production volumes. This is very painful for us. However, we recognize our customers are suffering as well, and we are working with them to ensure that we support each other. From our side, the compromise could involve deferring some volumes and extending some payment terms. From the customer side, it could mean buying out contracts or adding additional volumes in the future. As a result of this constantly evolving landscape, we have currently idled some of our longwalls and expect frequent changes to our Q2 operating schedule.

On the production side the mines are ready to run, but we will remain sales driven even though we have 25 plus million tons contracted for 2020, the timing of shipments and the magnitude of contract buyouts will dictate the ultimate sales and production volumes.

This is very painful for us however, we recognize our customers are suffering as well and we're working with them to ensure that we support each other.

From our side the compromise could involve that putting some volumes and extending some payment terms.

From the customer side, it could mean buying our contracts are adding additional volumes in the future.

As a result of this constantly evolving landscape. We are currently idled some of our Longwalls and expect frequent changes to our second quarter operating schedule.

Mitesh Thakkar: The management team also took significant steps to reduce the overall cost structure of the business in order to help offset the recent demand decline brought on by the COVID-19 pandemic. First, we adjusted our operating schedule. To reduce output to better align our production with customer demand, including making the decision in mid-April to temporarily idle our higher cost Enlow Fork Mine. Second, we embarked on several cost reduction initiatives that in aggregate could help us achieve approximately $100 million in cash preservation in 2020 compared to 2019. These include, number one, $8 to 10 million in cash SG&A savings by canceling annual merit increases, suspended planned hiring and cash incentive compensation. Number two, $45 to 50 million in capital expenditure reductions, mostly due to reduction in maintenance capital expenditure at the Pennsylvania Mining Complex.

The management team also took significant steps to reduce the overall cost structure of the business in order to help offset the recent demand decline.

Brought on by the forward 19 pandemic first we adjusted our operating schedule.

To reduced output to better align our production customer demand, including making the decision in mid April to temporarily idle or higher cost and look for mine.

Second we embarked on several cost reduction initiatives that an aggregate could help us achieve approximately $100 million in cash preservation.

In Twentytwenty come back to 2019. These include number one $8 million to $10 million in gas SDN is the savings by canceling annual merit increases suspended plan hiding.

And cash incentive compensation.

Number 245 to 50 million in capital expenditure reductions, mostly due to reduction in maintenance capital expenditure and the Pennsylvania mining complex.

Mitesh Thakkar: 3, $7 to 10 million in cash interest expense savings at CEIX due to debt extinguishment. 4, $30 to 40 million dollar cash savings due to reduced income taxes, and payroll tax deferrals. 5, $5.6 million dollars on a consolidated level and $14.4 million at the CCR level every quarter the distribution suspension stays in place. These cash preservation initiatives will provide us with the flexibility to opportunistically take advantage of the decline in the prices of our outstanding public debt. Finally, the board members of CEIX have also agreed to temporarily defer the cash compensation to support the cash preservation efforts of the company. Lastly, from a market perspective, although the COVID-19-driven economic slowdown has significantly reduced global energy demand, we are already beginning to see supply responses.

Number three seven to 10 million in cash interest expense savings at CES due to debt extinguishment.

Number $430 million to $40 million gas savings due to reduced income taxes and paid or tax deferrals.

Number five $5.6 million on a consolidated level and 14.4 million at the Seattle level every quarter the distribution suspension stays in place.

These cash preservation initiatives will provide us with the flexibility to opportunistically take advantage of the decline in the prices of outstanding public debt.

Lastly from a market perspective, although the covert 19, driven economic slowdown has significantly reduced global energy demand. We are already beginning to see supplied a sponsors.

Mitesh Thakkar: First, with the oil pricing and supply reductions arising from the new OPEC+ deal, Wood Mackenzie is now estimating that total non-OPEC supply may decline by as much as 4 million barrels per day, 3 million of which would come from the continental US, particularly in the Permian Basin. That's important because a significant oil supply reduction in the Permian also means a significant reduction in associated gas production. Furthermore, lower oil and natural gas prices are negatively affecting the financials of E&P companies and forcing a reduction in the size of their capital budgets. Industry observers are now estimating that E&P capital expenditures will decline by as much as 40% to 45% in 2020.

First with the oil pricing and supply deductions arising from the new OPEC plus deal Woodmackenzie is now estimating the total non OPEC supply may decline by as much as 4 million barrels per day.

3 million off which would come from the continental us, particularly in the Permian Basin.

That's important because a significant also applied reduction in the Permian also means a significant reduction in associated gas production.

Furthermore, lower oil and natural gas prices negatively affecting the financials of S&P companies and forcing a reduction in the size of the capital budgets industry observers are now estimating that S&P capital expenditures will decline by as much as 40% to 45% and Twentytwenty as a result of this reduced and.

Mitesh Thakkar: As a result of this reduced investment pace, industry experts are now projecting national gas prices to rise above $3 per MMBtu in 2021, which we believe will make coal more attractive to our power plant customers. In fact, IHS Markit now expects that US coal consumption could return to 2019 levels in 2021. This translates into approximately 125 million tons in demand recovery due to an increase in natural gas prices driving gas to coal switching in 2021. In the coal industry, domestic supply rationalization was already happening in 2019, and we expect that to accelerate in 2020. Internationally, as Jimmy mentioned, 36% of global seaborne supply is at risk of curtailment at current pricing levels.

Restaurant base.

Industry exports are now projecting natural gas prices to rise about $3, but I'm happy to you in 2021, which we believe we'll make whole more attractive to our power plant customers.

In fact, I just market now expects that us coal consumption could return to 2019 levels in 2021.

This translates into approximately 125 million times in demand recovery due to an increase in natural gas prices driving gas to call switching and 2021.

In the coal industry domestic supply rationalization was already happening in 2019, and we expect that to accelerate in 2020.

Internationally as Jimmy mentioned, 36% of global seaborne supply is at risk of curtailments at current pricing levels.

Mitesh Thakkar: Putting it all together, these developments could bode very well for us as we begin filling out the remainder of our 2021 contract book in the coming months. With that, let me turn it back to Jimmy to make some final comments.

Putting it all together these developments could bode very well for us as we begin filling out the remainder of our 2021 contract in the coming months.

With that let me turn it back to Jimmy to make some final comments.

James Brock: Thank you, Mitesh. Before we move on to the Q&A session, let me take this opportunity to lay out some of our priorities for the remainder of 2020 and address some of the uncertainty we are facing in the current economic climate. First and foremost, I want to commend our employees for their dedication, hard work, and willingness to adapt in these unprecedented times. We have adjusted procedures and protocols in order to keep everyone safe and prevent any unnecessary exposure to the coronavirus. We've enhanced cleaning and disinfecting practices at the mines, both on the surface and underground. We've also implemented additional social distancing measures, staggered shifts, reduced elevator capacities, and mandatory temperature checks at all mine entrance locations. Our corporate staff has been working remotely for well over a month now. I couldn't be prouder of our employees and their willingness to embrace these adjustments without hesitation.

Jimmy Brock: Thank you, Mitesh. Before we move on to the Q&A session, let me take this opportunity to lay out some of our priorities for the remainder of 2020 and address some of the uncertainty we are facing in the current economic climate. First and foremost, I want to commend our employees for their dedication, hard work, and willingness to adapt in these unprecedented times. We have adjusted procedures and protocols in order to keep everyone safe and prevent any unnecessary exposure to the coronavirus. We've enhanced cleaning and disinfecting practices at the mines, both on the surface and underground. We've also implemented additional social distancing measures, staggered shifts, reduced elevator capacities, and mandatory temperature checks at all mine entrance locations. Our corporate staff has been working remotely for well over a month now. I couldn't be prouder of our employees and their willingness to embrace these adjustments without hesitation.

Thank you much as.

Before we move onto the Q in a session. Let me take this opportunity to lap some of our priorities for the remainder of 2020 and address some of the uncertainty we are facing in the current economic climate.

First and foremost I want to commend our employees for their dedication hard work and wellness to Adap Andes unprecedented times.

We have adjusted procedures and protocols in order to keep everyone say and prevent any unnecessary exposure to the krona buyers.

We have enhance cleaning and disinfecting practices that demand both on the surface and underground.

We've also implemented additional social distancing measures staggered shifts reduced elevator capacities and mandatory temperature checks at all mine entrants locations.

Our corporate staff has been working remotely for well over a month now.

I couldn't be prouder of our employees and their willingness to embrace these adjustments without hesitation.

James Brock: I want to thank them for continuing to place safety above all else. For 2020, while we navigate this ever-changing landscape due to the uncertainty surrounding the COVID-19 pandemic, our main strategy of prioritizing a strong balance sheet will remain as we seek to delever, reduce our interest expense, and continue to take advantage of the dislocations in the prices of our debt securities. The reason our capital allocation strategy has been so effective is its consistency. Our priorities remain constant despite any fluctuations in commodity markets. By consistently targeting the highest rate of return projects, we are always reevaluating and willing to pivot in a new direction as the world around us changes. We proved this with our willingness to delay our Itmann growth project to prioritize the guaranteed high rate of returns associated with our second lien repurchases.

Jimmy Brock: I want to thank them for continuing to place safety above all else. For 2020, while we navigate this ever-changing landscape due to the uncertainty surrounding the COVID-19 pandemic, our main strategy of prioritizing a strong balance sheet will remain as we seek to delever, reduce our interest expense, and continue to take advantage of the dislocations in the prices of our debt securities. The reason our capital allocation strategy has been so effective is its consistency. Our priorities remain constant despite any fluctuations in commodity markets. By consistently targeting the highest rate of return projects, we are always reevaluating and willing to pivot in a new direction as the world around us changes. We proved this with our willingness to delay our Itmann growth project to prioritize the guaranteed high rate of returns associated with our second lien repurchases.

I want to thank them for continuing to play safety above all else.

For 2020.

While we navigate this ever changing landscape due to the uncertainty surrounding the cobot not team pandemic.

Our main strategy of prioritizing strong balance sheet will remain as we seek to de lever reduced our interest expense and continue to take advantage of the dislocations in the process of our debt securities.

The reason our capital allocation strategy has been so affected is its consistency.

Our priorities remain constant despite any fluctuations in commodity markets.

Consistently target the Haas rate of return projects, we are always reevaluating and willing to pivot and the new direction as the world around us changes.

We proved this with our willingness to delay or at mangrove project to prioritize the guaranteed high rate of returns associated with our second lien repurchases.

James Brock: Mitesh and his team will continue to remain laser-focused on boosting liquidity, improving financial flexibility, and reducing our overall debt. Jim McCafferty and his team will continue to work closely with our customers to manage their shipments and inventory levels. Eric and his team will continue to manage their cost structure and operating schedules to best align them with demand and preserve margins. Additionally, we are pulling multiple levers to preserve cash flow in this economic downturn.

Jimmy Brock: Mitesh and his team will continue to remain laser-focused on boosting liquidity, improving financial flexibility, and reducing our overall debt. Jim McCafferty and his team will continue to work closely with our customers to manage their shipments and inventory levels. Eric and his team will continue to manage their cost structure and operating schedules to best align them with demand and preserve margins. Additionally, we are pulling multiple levers to preserve cash flow in this economic downturn.

Mckesson his team will continue to remain laser focused on Boston liquidity, and proven financial flexibility and reducing our overall debt.

Jim Mcafee and his team will continue to work closely with our customers to manage their shipments and inventory levels and Eric and his team will continue to manage their cost structure and operating schedules to best that align them with demand and preserve margins.

Additionally, we are pull in multiple levers to preserve cash flow and this economic downturn.

James Brock: We have been able to reduce our capital spending requirements in 2020 thanks to our willingness to keep our mines well-capitalized in strong markets. We are working on reducing our operating cost structure at the mines through delaying discretionary spending and adjusting our operating schedules according to demand. We have also implemented significant cost saving measures at the corporate level as well. Finally, although there is a lot of uncertainty in the marketplace and nothing is guaranteed, we are currently 98% contracted for 2020, assuming a 26 million ton run rate. We have also contracted more than 10 million export tons in 2020 after XCoal increased the volume of tons to be acquired under its supply contract with us.

Jimmy Brock: We have been able to reduce our capital spending requirements in 2020 thanks to our willingness to keep our mines well-capitalized in strong markets. We are working on reducing our operating cost structure at the mines through delaying discretionary spending and adjusting our operating schedules according to demand. We have also implemented significant cost saving measures at the corporate level as well. Finally, although there is a lot of uncertainty in the marketplace and nothing is guaranteed, we are currently 98% contracted for 2020, assuming a 26 million ton run rate. We have also contracted more than 10 million export tons in 2020 after XCoal increased the volume of tons to be acquired under its supply contract with us.

We have been able to reduce our capital spending requirements in 2020, thanks to our willingness to keep our minds, well capitalized and strong markets.

We are working on reducing our operating cost structure at the mines.

Through deland discretionary spending and adjust in our operating schedules according to demand.

We have also implemented significant cost saving measures at the corporate level as well.

Finally, although there's a lot of uncertainty in the marketplace and nothing is guaranteed we're currently 98% contracted for 2020, assuming at 26 million ton run rate.

We have also contracted more than 10 million export tons in 2020. After exco increased the volume of tons to be acquired under his supply contract with us.

James J. McCaffrey: In summary, our key priorities for the remainder of 2020 are, one, to ensure the health and safety of our workforce, their families, and the communities in which we operate amidst the ongoing COVID-19 pandemic. Two, to safely and compliantly produce our high quality coal at the lowest possible cost. Three, to continue to work with our customers to ensure that the long-term nature of our relationships continue as we navigate this storm together. Fourth, to continue to improve our balance sheet and bolster our liquidity. Before I turn the call over, I wanna touch on one last point. As you may have seen, we are continuing to work through the very complicated and complex Murray Energy bankruptcy. As we have stated before, we will vigorously defend our rights, our employees, the communities in which we live and work, and our stakeholders in these proceedings.

Jimmy Brock: In summary, our key priorities for the remainder of 2020 are, one, to ensure the health and safety of our workforce, their families, and the communities in which we operate amidst the ongoing COVID-19 pandemic. Two, to safely and compliantly produce our high quality coal at the lowest possible cost. Three, to continue to work with our customers to ensure that the long-term nature of our relationships continue as we navigate this storm together. Fourth, to continue to improve our balance sheet and bolster our liquidity. Before I turn the call over, I wanna touch on one last point. As you may have seen, we are continuing to work through the very complicated and complex Murray Energy bankruptcy. As we have stated before, we will vigorously defend our rights, our employees, the communities in which we live and work, and our stakeholders in these proceedings.

In summary.

Our key priorities for the remainder of 2020 are want to ensure the health and safety of our workforce their families and communities and which we operate amidst the ongoing cobot 19 pandemic two to safely and compliantly produce our high quality coal at the lowest possible cost threeq to contain.

Turning to work with our customers to ensure that the long term nature of our relationships continue as we navigate this storm together and fourth to continue to improve our balance sheet and bolster our liquid.

Before I turn the call over I want to touch on one last point.

As you may have saying, we are continuing to work through the very complicated and complex Murray energy bankruptcy.

As we've stated before we will vigorously defend our rights our employees the communities in which we live and work and our stakeholders in these proceedings.

James J. McCaffrey: However, we cannot comment on any ongoing litigation matters associated with these proceedings, and we will not be fielding any questions on the topic today. With that, I will hand the call back over to Nate for further instructions.

Jimmy Brock: However, we cannot comment on any ongoing litigation matters associated with these proceedings, and we will not be fielding any questions on the topic today. With that, I will hand the call back over to Nate for further instructions.

However, we cannot comment on any ongoing litigation matters associated with these proceedings and we will not be further than any questions on the topic today.

With that I'll hand, the call back over to Nate for further instructions.

Nathan Tucker: Thank you, Jimmy. We will now move to the Q&A session of our call. Eric, can you please provide the instruction to our callers?

Thank you Jamie we will now move to the QNX session of our call. Eric can you. Please provide instructions are colors.

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too we will pause for one moment to assemble our roster.

Operator 3: Thank you. We will now begin the question and answer session. To ask a question, you may press Star-One on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star then two. We will pause for one moment to assemble our roster. Our first question today will come from Mark Levin with The Benchmark Company. Please proceed with your question.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press Star-One on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star then two. We will pause for one moment to assemble our roster. Our first question today will come from Mark Levin with The Benchmark Company. Please proceed with your question.

Our first question today will come from March 11, with the benchmark Company. Please proceed with your question.

Thanks, very much appreciate all the color.

Mark Levin: Thanks very much and appreciate all the color. I guess the first question is actually for Mitesh. Mitesh, you were reeling off all of those numbers in terms of SDNA savings and CapEx reduction. Is that relative to your 2019 actual or relative to the now suspended guidance? Just trying to, you know, benchmark how much we should adjust our our models for those, you know, for those numbers.

I guess first questions actually from attachments your reeling off all of those numbers in terms of STD savings and Capex reduction.

Is that right is that relative to your.

2019, actual or relative to the now suspended guidance just trying to.

Benchmark, how much we should adjust our.

Our models for those.

For those numbers.

Mitesh Thakkar: Sure. Thank you, Mark. I think those are all relative to 2019 actuals.

Sure. Thank you Mark I think those are all relative to 2019 actuals.

Okay Fair enough very very helpful. And then second question.

Mark Levin: Okay, fair enough. Very, very helpful. Second question relates to the export business. I guess you guys are shooting to sell about 10 million tons or have 10 million tons under contract. I guess what's the risk to that number? Then maybe more specifically, you guys ship a lot of tons to India. If you can maybe talk about what the environment is like in India with the lockdown and how much of a risk that would present.

Relates to.

Relates to the export business. So I guess you guys are on shooting to sell about 10 million tons or have 10 million tons under contract.

I guess, what's the risk to that number.

And then maybe more specifically you guys ship a lot of tons to India. If you can maybe talk about what the environment is like India with with the locked down and how much of a risk that that would present.

Hi markets, Jim how are you.

James J. McCaffrey: Hi, Mark. It's Jim. How are you?

Jim McCaffrey: Hi, Mark. It's Jim. How are you?

Mark Levin: I'm doing well. Thank you, Jim.

I'm doing well thank you Jeff.

James J. McCaffrey: I'm gonna do my best to answer your questions, but please keep in mind that visibility is not very clear, and we're reforecasting constantly. In India, as you know, they had a lockdown. A lot of the people left their working areas to go to their home bases again. The lockdown is supposed to be totally lifted by 18 May. We expect businesses to get back going in gear. A lot of demand destruction has taken place in India as well. The three large West Coast terminals are all relatively full with approximately 18 million tons. We still expect demand to be very strong in India. When we look at our Q1, we had shipped about 1.7 million tons to India, which was about 28% of our total sales.

I'm going to do my best to answer your questions, but please keep in mind that visibility is not very clear and were reforecasted cost them.

Jim McCaffrey: I'm gonna do my best to answer your questions, but please keep in mind that visibility is not very clear, and we're reforecasting constantly. In India, as you know, they had a lockdown. A lot of the people left their working areas to go to their home bases again. The lockdown is supposed to be totally lifted by 18 May. We expect businesses to get back going in gear. A lot of demand destruction has taken place in India as well. The three large West Coast terminals are all relatively full with approximately 18 million tons. We still expect demand to be very strong in India. When we look at our Q1, we had shipped about 1.7 million tons to India, which was about 28% of our total sales.

So but in India.

As you know they had locked out a lot of people left.

They're working areas to go to their home base is again.

The lock down as supposed to be totally lifted by May 18th we expect business just to get back billing gear.

But a lot of demand destruction has taken place in India as well and the three large Joe West Coast terminals are all relatively full.

Was approximately 18 million tons.

We still expect demand to be very strong in India.

When we look at our first quarter, we had shipped.

About 1.7 billion tons, India, which was about 28% of our of our total sales and.

James J. McCaffrey: That's up from previous years. Our sales are up some, and we continue to expect demand. As the shutdown ends, we're moving into monsoon season. As we exit monsoon, we expect to see some return in volume.

Jim McCaffrey: That's up from previous years. Our sales are up some, and we continue to expect demand. As the shutdown ends, we're moving into monsoon season. As we exit monsoon, we expect to see some return in volume.

And then that's up from previous years, so ours ours, our sales are up some and we continue to expect demand but.

As this.

As the shutdown ends we're moving into monsoon season. So.

As we.

As we exit monsoon, we expect to see some return.

And in volume.

Okay, and then Jim maybe.

Mark Levin: Okay. Jim, maybe you know, kinda in 2021, I think you guys mentioned you've got 40-some odd percent contracted in 2021. I realize netback contracts can change things and shifting tons from 2020 to 2021 can change things. As it stands right now and you look at what's contracted for next year, 2021, you know, should we anticipate a big price per ton reduction, a modest one, flat? I mean, how would one think about approximating what the 2021 book could look like? Maybe just assuming normal weather?

In 2021, I think you guys mentioned, you've got 40, some odd percent contracted in 2021, I realize netback contracts could change things in shifting tons from 20 to 21 can change things, but as it stands right now and you look at whats contracted for next year.

2021.

Should we anticipate a big price per ton reduction a modest one flat I mean, how would how would one think about approximating what the 2021 book could look like maybe just assuming normal weather.

Well Mark we're in negotiations for business for 2021, right now so I don't want to discuss price.

James J. McCaffrey: Well, Mark, we're in negotiations for business for 2021 right now, so I don't wanna discuss price too much. In general, you know, I think the published forwards are way too low and unsustainable. You know, you see where we're at today. I think we can maintain level or improve. Mitesh talked about the gas situation changing. We think that'll be a big benefit to our netback tons. You know, I would think we could hold the course or improve.

Jim McCaffrey: Well, Mark, we're in negotiations for business for 2021 right now, so I don't wanna discuss price too much. In general, you know, I think the published forwards are way too low and unsustainable. You know, you see where we're at today. I think we can maintain level or improve. Mitesh talked about the gas situation changing. We think that'll be a big benefit to our netback tons. You know, I would think we could hold the course or improve.

Too much but in general you know I think the to publish forwards are way too low non sustainable.

You see where we're at today.

I think we could maintain level or improve Mattel has talked about the gas situation changing.

We think that to be a big benefit to our our netback towns. So.

We think will we can hold the course or improve.

James Brock: One big factor.

And one bigger factor to one big fat on that markedly you know how quick these businesses get back opened and the demand starts to increase because thats, what we all need that'll help price and then if natural gas prices and up north of $3 NIM MBT EU as many of predicting that should have to process well.

Jimmy Brock: One big factor.

Mark Levin: Very helpful.

James Brock: One big factor on that, Mark, will be, you know, how quick these businesses get back open and the demand starts to increase because that's what we all need. You know, that'll help price. Then if natural gas prices end up north of $3/MMBTU, as many are predicting, that should help the price as well. There's some work to do as far as the inventories and, you know, there's a lot of uncertainty right now. We'll have to see how all of that goes in the future.

Jimmy Brock: One big factor on that, Mark, will be, you know, how quick these businesses get back open and the demand starts to increase because that's what we all need. You know, that'll help price. Then if natural gas prices end up north of $3/MMBTU, as many are predicting, that should help the price as well. There's some work to do as far as the inventories and, you know, there's a lot of uncertainty right now. We'll have to see how all of that goes in the future.

But there's some work to do as far as the inventories and there's a lot of uncertainty right. Now so we'll have to see how all of that goes into future.

Mark Levin: Yeah. No, that makes sense. My last question, you know, as you think about, and maybe this is for Mitesh. If you think about kind of, debt pay down versus maintaining a certain amount of liquidity, you know, how do you toe that balance? Is there a liquidity target that you have, sort of a minimum level? Obviously, you've been active in repurchasing debt, but I was just trying to figure out how to calibrate, what you're comfortable with in terms of maintaining, you know, a minimum amount of liquidity.

Now that makes sense and my last question.

As you think about maybe this is from attached if you think about kind of debt pay down versus maintaining a certain amount of liquidity. How you to that balance is there a liquidity target that you have sort of a minimum level, obviously, you've been active and repurchasing debt, but I was just trying to figure out how to calibrate what you're comfortable with in terms of liquidity.

Maintaining a minimal amount of liquidity.

Mitesh Thakkar: Sure. Mark, I think, as you pointed out, it's a balance, right? And that's why we mentioned earlier in the call that we are not gonna be super aggressive on anything. We are gonna make sure that at all times we have adequate amount of liquidity. I think I'm comfortable where our liquidity sits today. Now, if the market conditions improve and we start seeing businesses open up, I think, we could potentially deploy some more cash. I think, we'll have to make sure that at all times we have a significant amount of liquidity. We are also looking at other sources of financing, one of which we have executed in Q1.

Sure Mark I think.

As you pointed out it's a balance right and Thats why we mentioned earlier in the call that we're not going to be super aggressive on anything we are going to make sure that weve at all the time should we have adequate amount of liquidity I think I'm comfortable liquidity sits today.

Now.

If the market conditions improve and we start seeing business is open up I.

I think big we could potentially deployed some more cash but I think.

We will have to make sure that at all times, we have significant amount of liquidity is.

We're also looking at other sources of financing one off let shop, we have executed in the first quarter.

Mitesh Thakkar: If there are opportunities like that where essentially you are borrowing low cost capital and taking advantage of market dislocations and retiring high cost capital, we'll look at those opportunities as well. I think free cash flow generation, the good thing is the business generates free cash flow, and as long as that continues, we can deploy some amount of cash, taking advantage of market dislocations.

So if there are opportunities like that wed essentially you're borrowing low cost capital and taking advantage of market dislocations and retarding high cost capital, we'll we'll look at those opportunities as well. So I think free cash flow generation. The good thing is a business generated free cash flow and as long as that Tom that continues.

We can we can deploy some amount of cash.

Taking advantage of market dislocations.

Great Fantastic. Thanks for the time this morning.

Mark Levin: Great. Fantastic. Thanks for the time this morning.

James Brock: Thanks, Mark.

Jimmy Brock: Thanks, Mark.

James J. McCaffrey: Thanks, Mark.

Jim McCaffrey: Thanks, Mark.

Thanks, Mark Thanks, Mark.

Our next question comes from Lucas pipes, the B. Riley FBR. Please proceed with your question.

Operator 3: Our next question comes from Lucas Pipes of B. Riley FBR. Please proceed with your question.

Operator: Our next question comes from Lucas Pipes of B. Riley FBR. Please proceed with your question.

Lucas Pipes: Hey, good morning, everyone, and I hope you're all doing well and staying safe. I wanted to kind of follow up a little bit on that last question from Mark. In terms of the potential for things to get worse, just I understand that, look, it seems to be improving. Natural gas prices are up and such. But, like, within the coal markets, of course, there are a lot of inventory. So if things don't kind of come back here over the next 3, 6 months, 9 months, and the market stays oversupplied, what should we expect from you in terms of being able to respond to this market environment, both from an operational as well as from a kind of cash liquidity perspective? Thank you.

Hey, good morning, everyone.

Staying safe I wanted to.

A follow up a little bit on that.

Some march.

In terms of.

The potential for takes to get worse.

I understand that.

Okay.

Just to be improving natural gas prices, such but I'd like.

Nicole markets of course.

So if it's fixed kind of come back.

Over the next three six months.

And the markets.

Well what should we expect from you in terms of being able to respond to this market environment.

Operational as follows.

Cash liquidity.

Thank you.

Well from an operational standpoint, Lucas, we've always said that we will run to the market and Thats currently what we're doing today. So it's a it used to be a weekly thing now it's a daily thing that we actually sat down and look at what our forecast are for the day for the weak and then we're.

James Brock: Well, from an operational standpoint, Lucas, you know, we've always said that we will run to the market, and that's currently what we're doing today. It used to be a weekly thing, now it's a daily thing that we actually sit down and look at what our forecasts are for the day, for the week, and then we adjust accordingly. That's one of our strong suits with the Pennsylvania Mining Complex, is the optionality we have with the complex to whereas, you know, we can run one longwall or we can run five longwalls, but it will be dependent upon what the market. Good news for us is, you know, we don't have ground storage, so we don't have a lot of inventory to work through.

Jimmy Brock: Well, from an operational standpoint, Lucas, you know, we've always said that we will run to the market, and that's currently what we're doing today. It used to be a weekly thing, now it's a daily thing that we actually sit down and look at what our forecasts are for the day, for the week, and then we adjust accordingly. That's one of our strong suits with the Pennsylvania Mining Complex, is the optionality we have with the complex to whereas, you know, we can run one longwall or we can run five longwalls, but it will be dependent upon what the market. Good news for us is, you know, we don't have ground storage, so we don't have a lot of inventory to work through.

Adjusted Accordingly, as one of the our strong sense with the Pennsylvania mining complex is the Optionality, we have with the complex to whereas we can run one longwall, we can run five longwalls, but it will be dependent upon what the markets. Good news for US is we don't have ground stored so we don't have a lot of inventory to work too.

James Brock: As long as we stay in communication with our Class I railroads, then we can move that coal out. It's a matter of what coal shipments we have for that week and what's the quality. That'll pretty much determine which longwall we need to run. Then it's all about cost. It's about managing cash and running the lowest cost operation you can. From an operations standpoint, we'll continue to look at ways to take out cost, and then we'll run to whatever the market requirements are for that week or that day.

Jimmy Brock: As long as we stay in communication with our Class I railroads, then we can move that coal out. It's a matter of what coal shipments we have for that week and what's the quality. That'll pretty much determine which longwall we need to run. Then it's all about cost. It's about managing cash and running the lowest cost operation you can. From an operations standpoint, we'll continue to look at ways to take out cost, and then we'll run to whatever the market requirements are for that week or that day.

As long as we stay in communication with our tier one railroads then we can move that coal out. So it's a matter of what coal shipments to we have for that week and wants to quality that'll pretty must determine which longwall, we need to Ron and then as it's all about costs, it's about managing cash in Rand.

Lowest cost operationally can suffer an operation standpoint, we will continue to look at ways to take out cost.

And then we'll run to whatever that the market requirements are for that week or that day.

Mitesh Thakkar: On the financial side, Lucas, I was answering Mark's question. I think we would like to remain flexible. The good thing is, we refinanced our debt last year, so we don't have any immediate maturities. I think we got an attractive interest rate here. So, the way I would think about it is, without compromising liquidity, as long as we are able to carry out some of the transactions. As you can see, our board is supportive of this strategy as well, as they approved an increase in authorization, will allow us to be opportunistic in the marketplace.

On the financial side Lukas like I I was talking too.

Marks question I was answering marks question I think.

We will like to remain flexibility the good thing is.

We refinanced our debt last year. So we don't have an immediate maturities I think we got.

We got to attractive interest rate here.

So.

The way I would think about it is.

Without compromising liquidity as as long as we are able to carry out some of the transactions and as you can see our board is supportive of the strategy as well as they approved an increase in authorization will allow us to.

Be opportunistic in the marketplace and then on the market side Lucas.

James J. McCaffrey: On the market side, Lucas, you know, some of our customers have flexibility built into their contract, and we expect that most of those will fully use their flexibility that they're allowed. At some point, they can't move all their tons into 2021. They have to take and burn tons in 2020 or they have to buy us out of the tons. In Q1, you know, we have already stated that we had $10.8 million of buyouts, which represents about 550,000 tons. You know, we would much prefer to mine, ship, and burn those tons than we would just get a buyout. It does give us the ability to continue to bring cash into the business.

Jim McCaffrey: On the market side, Lucas, you know, some of our customers have flexibility built into their contract, and we expect that most of those will fully use their flexibility that they're allowed. At some point, they can't move all their tons into 2021. They have to take and burn tons in 2020 or they have to buy us out of the tons. In Q1, you know, we have already stated that we had $10.8 million of buyouts, which represents about 550,000 tons. You know, we would much prefer to mine, ship, and burn those tons than we would just get a buyout. It does give us the ability to continue to bring cash into the business.

Well some of our customers have flexibility built into their contract and we expect the most of those will fully use their flexibility that they're allowed but at some point. They can't move all there are tons into 2021, so they have to take unburned targeted 20.

Or they have to bias out of the tons and in the first quarter. We have already stated that we had 10.8 million tons of buyouts.

$10.8 million of buyouts, which represents about 550000 times.

So you know we would much prefer to mine ship and burn those times than we would just get a bar out but.

It does give us the ability to continue to bring cash into the business.

Yes.

David Brown: Yeah. No, that's very helpful. Appreciate all the color there. A follow-up on just kind of cash management and balance sheet management. Great to see that increased authorization from the board on the debt repurchase side. I wondered if you could maybe speak to the cadence of potential additional buybacks. Obviously, a great way to de-leverage the balance sheet here given what the market is doing. Thank you.

Lucas Pipes: Yeah. No, that's very helpful. Appreciate all the color there. A follow-up on just kind of cash management and balance sheet management. Great to see that increased authorization from the board on the debt repurchase side. I wondered if you could maybe speak to the cadence of potential additional buybacks. Obviously, a great way to de-leverage the balance sheet here given what the market is doing. Thank you.

Very helpful.

Although there.

A follow up.

Cash management.

Great to see that increased authorization support.

Purchase side.

You could maybe speak to that cadence potential.

Buybacks.

Great.

The balance sheet here.

Yes.

Mitesh Thakkar: I think, Lucas, it is hard in this market to give you, like, the exact numbers on how we are gonna execute that. Again, like I said, it depends on where the market is and how much cash is coming in the door. I mean, if Jim McCafferty brings in more cash in the door, you will see that pace increase. And we'll make sure that, you know, we don't compromise liquidity in this market. I think the board authorization is for two years as it sits today, an additional two years. As you have seen in the past, that if we are executing it faster, we have added to that authorization if need be.

I think Lucas.

It is hard in this market to give you like the exact numbers on how we're going to execute that again like I said it depends on where the market is and how much cash is coming in the door I mean, if Jim Mccafferty brings in more cash in the door you will see that based increase.

And and and we'll make sure that.

No we don't compromise liquidity in this market.

So I think the board at the board authorization is for two years as it sits today, an additional two years, but as you've seen in the past that if we if we are executing at a faster.

We have added to that authorization if need be.

Mitesh Thakkar: Like I said, it's hard to give you a very accurate cadence without knowing what the market has in store for us next week, next month.

But like I said, it's hard to give you are very accurate cadence without knowing what the market has in store for US next week next month, Yes, I think I think simply put.

Mitesh Thakkar: Like I said, it's hard to give you a very accurate cadence without knowing what the market has in store for us next week, next month.

James Brock: Yeah. I think simply put, Lucas, it's our capital allocation process. We'll stay with that. We have the flexibility to, you know, repurchase shares or pay back debt, and it'll always be on the highest rate of return.

Jimmy Brock: Yeah. I think simply put, Lucas, it's our capital allocation process. We'll stay with that. We have the flexibility to, you know, repurchase shares or pay back debt, and it'll always be on the highest rate of return.

Lucas, it's our capital allocation process will stay with that we have the flexibility to repurchase shares or payback that and it will always be on the house rate of return.

That's very helpful.

David Brown: That's very helpful. Gentlemen, I really appreciate the color and continued best of luck.

Lucas Pipes: That's very helpful. Gentlemen, I really appreciate the color and continued best of luck.

Yes.

Thank you thanks Lucas.

James J. McCaffrey: Thank you.

Jim McCaffrey: Thank you.

Mitesh Thakkar: Thanks, Lucas.

As a reminder, if you wish to ask a question. Please press Star then one on your Touchtone phone.

Operator 3: Our next question comes from Michael Dudas of Vertical Research Partners. Please proceed with your question.

Operator: Our next question comes from Michael Dudas of Vertical Research Partners. Please proceed with your question.

Our next question comes from Michael Dudas, the vertical research partners. Please proceed with your question.

Michael Dudas: Good morning, gentlemen.

Hi, good morning, gentlemen.

Michael Dudas: Good morning, gentlemen.

James J. McCaffrey: Morning.

Jim McCaffrey: Morning.

Mitesh Thakkar: Morning.

Operator 2: Mike, first question, just clarification on the ex-coal announcement relative to the tonnage to the Dominican Republic. That 1.8 million tons, that's all gonna be sourced by you guys. Is that for this year? Is that an annual basis or spread out? How's that work through?

Jimmy Brock: Mike,

Good morning.

First question just clarification on the ex coal that ultimate relative to the tonnage for the Dominican Republic that one Penny lane, because that's all going be sourced by you guys and is that for this year is at an annual basis are spread out how is that how that worked through.

Michael Dudas: First question, just clarification on the ex-coal announcement relative to the tonnage to the Dominican Republic. That 1.8 million tons, that's all gonna be sourced by you guys. Is that for this year? Is that an annual basis or spread out? How's that work through?

James J. McCaffrey: We expect it'll all be sourced from us. The 1.8 million is really 1.8 million metric, Mike. We weren't totally clear on that. It'll be done in three four-month trimesters starting in May. It's really for a year starting in May.

[music].

We expect it all be source from us the 1.8 million is really 1.8 million metric, Mike we we weren't totally clear on that.

Jim McCaffrey: We expect it'll all be sourced from us. The 1.8 million is really 1.8 million metric, Mike. We weren't totally clear on that. It'll be done in three four-month trimesters starting in May. It's really for a year starting in May.

And it will be done in three four month trial trimester starting in May.

So it's really for years starting in May okay.

Operator 2: Okay. Terrific. That's helpful. Secondly, the amount of customer buyout you saw in the quarter, like, just get a sense of how do you think things are gonna trough as we start to end the lockdowns and recover and see load factors improve. Do you sense that your existing customer base will keep that pace of buyouts because of the lockdown? Or will that maybe start to subside as things get back to normal? As you're talking to your customers, you know, I know you're looking daily and weekly on your nominations, any insight from them? Any sense of where that flows, you know, respective of where gas price or power price might be?

Michael Dudas: Okay. Terrific. That's helpful. Secondly, the amount of customer buyout you saw in the quarter, like, just get a sense of how do you think things are gonna trough as we start to end the lockdowns and recover and see load factors improve. Do you sense that your existing customer base will keep that pace of buyouts because of the lockdown? Or will that maybe start to subside as things get back to normal? As you're talking to your customers, you know, I know you're looking daily and weekly on your nominations, any insight from them? Any sense of where that flows, you know, respective of where gas price or power price might be?

Perfect Thats helpful. Secondly.

Yeah, the amount of customer buyout, you saw the quarter Gee, let's just go sense. So how do you think things are going to trough says.

As we start to the Lockdowns and recover unsi load factors improve.

Do you sense that your existing customer base will keep that pace of buyouts lock the buyout because of the lock down.

Or will that maybe start to subside as things get back to normal and as you are talking to your customers Millennial you look at daily and weekly on your on your nominations.

Any any insight from them any sense of where that flows respectable where gas price or power price might be.

As far as the the pace of buyouts Mike.

James J. McCaffrey: As far as the pace of buyouts, Mike, you know, we will have some buyouts in Q2. We certainly hope that's the peak. As I said earlier, our intent is not to have our customers buy out. Our intent is to deliver and have the product burned. In terms of gas, I think our customers are just starting to feel their way through that now as more and more reports come out about the loss of associated gas and the fact that it looks like the gas curves are getting stronger for the end of the year and for 2021. I can't say that we've had a lot of dialogue on that. We've had some.

Jim McCaffrey: As far as the pace of buyouts, Mike, you know, we will have some buyouts in Q2. We certainly hope that's the peak. As I said earlier, our intent is not to have our customers buy out. Our intent is to deliver and have the product burned. In terms of gas, I think our customers are just starting to feel their way through that now as more and more reports come out about the loss of associated gas and the fact that it looks like the gas curves are getting stronger for the end of the year and for 2021. I can't say that we've had a lot of dialogue on that. We've had some.

We will have some buyouts in the second quarter, we certainly hope that's the peak as I said earlier, our intent is not to have our customers by all our intent is to deliver and have the product part.

In terms of in terms of gas I think our customers or is just starting to feel their way through that now is more and more reports come out about the.

Oh, the loss of auxiliary gas.

And the fact that it looks like.

The gas curves are getting stronger for the ended the year and for 2021.

So I can't say that we've had a lot of a lot of dialogue on that we've had some.

James J. McCaffrey: It's something that we're working on very hard right now. We're talking to our customers on a weekly basis, sometimes more often, and we are working on things for 2021.

Jim McCaffrey: It's something that we're working on very hard right now. We're talking to our customers on a weekly basis, sometimes more often, and we are working on things for 2021.

Its a.

It's something that we're working on very hard right now we're talking to our customers on a weekly basis, sometimes more often and we are working on things for 24.

I appreciate that you mean limit or share my final question would be on this.

Operator 2: I appreciate that, Jimmy. Or Jim, my final question would be, you know, on this, you know, moving this topic further. Looking at competitive environment, domestic coal producers, some large ones, as you know, are in some difficult financial positions. Are customers more concerned about that? Do you get a sense there could be potential for share gains? And, you know, how significant do you think the production response, you know, certainly is probably gonna be ahead of when demand picks up for gas and certainly coal. It seems pretty dire out there in the eastern coal fields and can that certainly help as you kind of time in your export layers and your layers into 2021 and beyond? Thank you.

Michael Dudas: I appreciate that, Jimmy. Or Jim, my final question would be, you know, on this, you know, moving this topic further. Looking at competitive environment, domestic coal producers, some large ones, as you know, are in some difficult financial positions. Are customers more concerned about that? Do you get a sense there could be potential for share gains? And, you know, how significant do you think the production response, you know, certainly is probably gonna be ahead of when demand picks up for gas and certainly coal. It seems pretty dire out there in the eastern coal fields and can that certainly help as you kind of time in your export layers and your layers into 2021 and beyond? Thank you.

Public further looking at competitive environment domestic coal producers.

Some large ones as we know our in some difficult financial positions.

Our customers more concerned about that you get a sense there could be potential for share gains.

And how significant you think the production response.

Certainly is probably going to be ahead of when demand picks up for gas and certainly coal seems pretty darn authored eastern coal, we open and connect certainly help as you kind of crime in your export layers and layers into 2021 would be on thank you.

Well you know for US Mike Mattel said this in his remarks I mean, our minds are ready to go there fully capitalized they're fully developed.

James J. McCaffrey: Well, you know, for us, Mike, Mitesh said this in his remarks. I mean, our mines are ready to go. They're fully capitalized. They're fully developed. We don't, you know, to ramp up production, we don't have to go in there and do anything special. Whereas someone that might be in bankruptcy or someone that had to work hard just to hold cash together may have sacrificed some development speed, may have sacrificed some spending that needed to be done on really needed maintenance.

Jim McCaffrey: Well, you know, for us, Mike, Mitesh said this in his remarks. I mean, our mines are ready to go. They're fully capitalized. They're fully developed. We don't, you know, to ramp up production, we don't have to go in there and do anything special. Whereas someone that might be in bankruptcy or someone that had to work hard just to hold cash together may have sacrificed some development speed, may have sacrificed some spending that needed to be done on really needed maintenance.

Oh.

To ramp up production, we don't have to go in there and do anything special whereas someone that might be in bankruptcy or someone else had to work hard just to hold cash together may have sacrificed some development speed man sacrifice some spending the needed to be done on on really needed maintenance. So we buy.

James Brock: We find that we're in position to move quickly as the market improves. That's what we intend to do. You know, I've read a lot of studies. There's a lot of debate about, you know, where coal is gonna be this year and next year. You know, some people think that we could have anywhere from 125 million to 170 million tons recovery in 2021. You know, we'll be ready for it. I'm not sure the whole industry will be.

Jim McCaffrey: We find that we're in position to move quickly as the market improves. That's what we intend to do. You know, I've read a lot of studies. There's a lot of debate about, you know, where coal is gonna be this year and next year. You know, some people think that we could have anywhere from 125 million to 170 million tons recovery in 2021. You know, we'll be ready for it. I'm not sure the whole industry will be.

And we find that weren't position to move quickly as the market improves and that's that's what we intend to do.

You know I've heard a lot of studies, there's a lot of debate about where coal is going to be this year next year, but you know some some people think that we could have anywhere from 125 million 270 million tons recovery in 2021.

And we'll be ready for it I'm not sure the whole industry will be.

I agree Jim Thanks for your posture with good luck.

Michael Dudas: I agree, Jim. Thanks for your thoughts, gentlemen. Good luck.

Our next question will come from Matthew fields with Bank of America. Please proceed with your question.

Operator 3: Our next question will come from Matthew Fields with Bank of America. Please proceed with your question.

Operator: Our next question will come from Matthew Fields with Bank of America. Please proceed with your question.

Hi, everyone.

Matthew Fields: Hey, everyone. Just a couple more housekeeping follows from me. Have you purchased any more second lien bonds in the 40-some-odd days since 31 March?

Just a medical mark.

More housekeeping follow ups for me.

Have you purchase anymore cycle and bonds in the and the 40, some odd days since March 31.

We have not yet.

Mitesh Thakkar: We have not yet. Just to remind everyone that we do have a restriction on our second lien, which is tied to our leverage ratio. Right now we are not buying our second lien debt.

No just to remind everyone that we do have a restriction on our second meeting which is tied to a leverage ratio.

So right now we're not buying our second lien debt.

Okay. Thank you and then the Capex guidance I think you said that it was it was the reductions I think.

Matthew Fields: Okay. Thank you. Then, the CapEx guidance, I think you said that it was the reductions, I think, correct me if I'm wrong, $45 to 50 million lower CapEx, but that's from a 2019 level, so that's like $120 to 125 million guidance for 2020 now?

Correct me, if I'm wrong, 45 to 50 million lower capex, but that's from a 2019 level. So that that like a 120 to 125 million guidance for 2020 now.

Mitesh Thakkar: Again, we are not providing guidance, so I'll not give you the range, but I think you are in the neighborhood. Remember, this is a constant work in progress, so we are looking at everything. Think of this that initial steps.

[music].

Again, we're not providing guidance.

So I'm not give you the range, but I think you're in the neighborhood and remember this is a constant work in progress. So we're looking at everything.

So think of does that.

Initial steps.

Matthew Fields: Okay. You mentioned that, you know, the Enlow Fork Mine was sort of the higher cost mine in your comments that you decided to idle. Can you give us an idea of sort of the cost, the cash cost per ton for Enlow Fork compared to your other two in the PAMC?

Okay.

And then you mentioned that you know the Enlow Fork mine was sort of the higher cost mine in your comments that you decided to idle can you give us an idea of sort of the cost the cash cost per ton per and low four compared to two your other too in the PMC.

So so mad we don't talk about our individual minds, but in terms of cost structure I think we run BMC as a complex, but as you know annual Fourq is going through a high subsidence year. It started in 2019, and we have often talk about us on the call that the call have subsided.

Mitesh Thakkar: So, Matthew, we don't talk about our individual mines, but in terms of cost structure, I think we run PAMC as a complex. As you know, Enlow Fork is going through a high subsidence year. It started in 2019, and we have often talked about this on the call that because of subsidence, that cost is a little bit skewed in this year. That is the primary reason where unless, you know, we figure out a way to lower the cost structure at Enlow, or the market demand recovers, I think, we'll be very careful on how that mine is brought back online.

That cost us a little bit.

Skewed and in this year and that is the primary reason that unless we figured out a way to lower the cost structure and low.

Although the market demand recovers I think.

We'll be very careful on how that mind is brought back online.

James J. McCaffrey: Yeah. Just to add to that a little bit, Matthew, you know, Enlow Fork, you've heard us talk about it many times before, the geological conditions they have, and this is primarily up in the north. Enlow Fork will be moving to our new eastern reserves, and we'll be out of that high subsidence area up there. We only lack two short panels, and we'll be moved out of there in next year in 2021. We expect the cost to more normalize to our other operations in the mining complex, but we have to get out of the north side before we get over there. That's the reason for the higher cost. I mean, they have the same operating mentality and equipment. It's just some of the conditions they have haven't allowed them to be very cost effective there.

Jimmy Brock: Yeah. Just to add to that a little bit, Matthew, you know, Enlow Fork, you've heard us talk about it many times before, the geological conditions they have, and this is primarily up in the north. Enlow Fork will be moving to our new eastern reserves, and we'll be out of that high subsidence area up there. We only lack two short panels, and we'll be moved out of there in next year in 2021. We expect the cost to more normalize to our other operations in the mining complex, but we have to get out of the north side before we get over there. That's the reason for the higher cost. I mean, they have the same operating mentality and equipment. It's just some of the conditions they have haven't allowed them to be very cost effective there.

Yeah, and just to add to that little bit Matthew Enlow Fork, you've heard us talk about it many times before the geological conditions. They have and this is primarily up into north and low fourq will be move into our new eastern reserves and we'll be out of that has subset subsidence area. There were only lack to short panels and would be moved.

Out of there and net next year in 2021, so we expect the cost to more normalized to our other operations in the mining complex, but we have to get out of the north side before we get over there and Thats. The reason for the higher cost I mean, they have the same operating mentality and equipment is just some of the conditions. They have haven't allowed them to be <unk>.

Active there I'd also add that this is also shipment driven right like so if we get back to our normal pace of shipments.

Mitesh Thakkar: I'll also add that this is also shipment driven, right? Like, so if we get back to our normal pace of shipments, the idea is not here to say that Enlow Fork doesn't make money in the current environment at our current contracted price. It is when the shipments fall off, you automatically scale back production. When you're scaling back production, you are scaling back at your higher cost mines. This is not saying that Enlow Fork cannot make money at our current prices. It's just our shipment level is temporarily low because of COVID-19 related demand decline.

No. The idea is not here to see an annual for doesn't make money in the current environment at our current contracted price. It is when the shipments fall off you automatically scaled back production and when you're scaling back production you're scaling back at your higher cost mines. This is not saying that animal for cannot make money at our current prices that shifts our shipment level.

As temporary to know because of covered 19 related demand decline.

Okay I understand thanks for all the help on and clarification one that.

Matthew Fields: Okay, I understand. Thanks for all the help and clarifications on that.

Mitesh Thakkar: Yeah.

Yes.

As a final reminder, if you wish to ask a question. Please press Star then one.

Operator 3: As a final reminder, if you wish to ask a question, please press star then one. Our next question will come from Nick Jarmoszek with Stifel. Please proceed with your question.

Operator: As a final reminder, if you wish to ask a question, please press star then one. Our next question will come from Nick Jarmoszek with Stifel. Please proceed with your question.

Our next question will come from Nick Jarmoszuk with Stifel. Please proceed with your question.

Nick Jarmoszek: Hi. Good morning. Question on the CCR/CEIX relationship. Has there been any discussion regarding CCR addressing the principal due to CEIX?

Nick Jarmoszuk: Hi. Good morning. Question on the CCR/CEIX relationship. Has there been any discussion regarding CCR addressing the principal due to CEIX?

Hi, good morning.

Question on the CCRC Iots relationship.

Will or is there isn't any discussion regarding CCR addressing the principal due to see IMAX.

Repeating the question Nick.

Mitesh Thakkar: Repeat that question, Nick.

Nick Jarmoszek: I'm basically wondering, is CCR gonna be chipping away at the principal due to CEIX?

Nick Jarmoszuk: I'm basically wondering, is CCR gonna be chipping away at the principal due to CEIX?

I'm basically wondering if youre going to be chipping away at the principal due to CDAI acts.

I think.

Mitesh Thakkar: I think, generally speaking, CCR, as you saw, the leverage ratio ticked up. Because of the market uncertainty, we suspended the distribution. To the extent any cash that doesn't get distributed and CCR generates that cash, I think it is prudent for CCR to pay down the debt that will save some interest expense for CCR.

Generally speaking.

CCR as you saw the leverage ratio ticked up.

And because of the market uncertainty, we suspended the distribution to the extent any cash that.

Doesn't get distribute NCR generates that cash I think it has proven for CEOC to pay down.

The debt that will say would save some interest expense were CCR.

Yeah and.

Nick Jarmoszek: Okay. A question for you on the natural gas price. You're talking about $3 or $3 outlook for 2021 could increase coal burn. Now, how do you think about what's the magic number you guys need to start seeing some gas to coal switching for your customers? Is it $3 or is it a little higher, a little lower?

Nick Jarmoszuk: Okay. A question for you on the natural gas price. You're talking about $3 or $3 outlook for 2021 could increase coal burn. Now, how do you think about what's the magic number you guys need to start seeing some gas to coal switching for your customers? Is it $3 or is it a little higher, a little lower?

Okay.

Question for you on the natural gas price.

So you're talking about $3. There are three dollar outlook for 21 could increase coal burn now how do you think about is what what's the magic number you guys need start seeing so.

Yes, the coal switching or your customers.

Is it $3 or is that a little higher little lower.

James J. McCaffrey: Well, you know, first of all.

Jim McCaffrey: Well, you know, first of all.

Hardware consulting.

Nick Jarmoszek: Depending on where you're shipping it?

Nick Jarmoszuk: Depending on where you're shipping it?

James J. McCaffrey: First of all, you know, any increase in the gas price helps improve our burn at our netback pricing mines. We've said before that our netback price

Jim McCaffrey: First of all, you know, any increase in the gas price helps improve our burn at our netback pricing mines. We've said before that our netback price

First of all.

Any any increase in the gas price helps improve our burn at our netback pricing.

We've said before.

At our netback price.

James J. McCaffrey: It has its base price that is equivalent to around $25 in the PJM. Above that, we get an energy market adjustment, and then an energy market adjustment adds up to $0.20 across the entire portfolio for every $1 of improvement in the PJM. Now, we're looking at the forwards today, and the forwards are taking a big jump in July to above $25, and they're showing growth to above $30 by the end of the year. You know, we think that that's gonna make a better H2 for the netback deals and for next year. Any improvement in the gas market, it benefits. Nick, I would say that we find most of our customers model their ± on gas around $2.50 to $2.75.

Jim McCaffrey: It has its base price that is equivalent to around $25 in the PJM. Above that, we get an energy market adjustment, and then an energy market adjustment adds up to $0.20 across the entire portfolio for every $1 of improvement in the PJM. Now, we're looking at the forwards today, and the forwards are taking a big jump in July to above $25, and they're showing growth to above $30 by the end of the year. You know, we think that that's gonna make a better H2 for the netback deals and for next year. Any improvement in the gas market, it benefits. Nick, I would say that we find most of our customers model their ± on gas around $2.50 to $2.75.

As is based price that is equivalent to around $25 into PJM above that we get an energy market adjustment.

And then energy market adjustment is twice adds up to 20 cents across the entire portfolio for every dollar of improvement into PJM.

No we're looking at the forwards today.

And forwards are taking a big jump in July.

Two above $25 and they're showing growth to about $30 by the end of the year. So.

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We think that that that's going to make a better you'd better second half for the netback deals and four and for next year, but any improvement into gas market it benefits.

Nick I would say that we find most of our customers.

Model model to serve plus or minus on gas around 250 to 75, So I think thats a good number to model.

James J. McCaffrey: I think that's a good number to model at.

Jim McCaffrey: I think that's a good number to model at.

Okay.

Nick Jarmoszek: Okay. All right. Last question just regarding the XCoal contracts that are coming up at the end of this year. Any updates regarding the discussions there?

Nick Jarmoszuk: Okay. All right. Last question just regarding the XCoal contracts that are coming up at the end of this year. Any updates regarding the discussions there?

Alright, and then last question just regarding the X whole contracts that are coming up at the end of this here can you just.

Any updates regarding the discussions there.

Theres discussions.

James J. McCaffrey: There's discussions.

Jim McCaffrey: There's discussions.

Yes that contract runs through December this year, and we have started some light discussions on that we expect to get heavy into that a little bit later in year, one get some some sort of certainly coming back to us once we get out of this pandemic situation.

James Brock: Yeah, that contract runs through December this year, and we have started some light discussions on that. We expect to get heavy into that a little bit later in the year when we get some, you know, some sort of certainty coming back to us once we get out of this pandemic situation.

Jimmy Brock: Yeah, that contract runs through December this year, and we have started some light discussions on that. We expect to get heavy into that a little bit later in the year when we get some, you know, some sort of certainty coming back to us once we get out of this pandemic situation.

Nick Jarmoszek: Okay, that's great. Thank you.

Nick Jarmoszuk: Okay, that's great. Thank you.

That's great. Thank you.

Thank you. This concludes our question and answer session I would now like to turn the conference back over to Nathan Tucker for any closing remarks.

Operator 3: Thank you. This concludes our question and answer session. I would now like to turn the conference back over to Nathan Tucker for any closing remarks.

Operator: Thank you. This concludes our question and answer session. I would now like to turn the conference back over to Nathan Tucker for any closing remarks.

Thank you Eric we appreciate everyone's time this morning, and thank you for your interest and support of C. I extend CCR hopefully we were able to answer most of your questions. Today, we look forward to our next quarterly earnings call. Thanks, everybody. Thank you everyone. Thanks.

Nathan Tucker: Thank you, Eric. We appreciate everyone's time this morning, and thank you for your interest in and support of CEIX and CCR. Hopefully, we were able to answer most of your questions today. We look forward to our next quarterly earnings call. Thanks, everybody.

James Brock: Thank you, everyone.

Jimmy Brock: Thank you, everyone.

James J. McCaffrey: Thanks, guys.

Jim McCaffrey: Thanks, guys.

The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect.

Operator 3: The conference is now concluded. Thank you very much for attending today's presentation. You may now disconnect.

Operator: The conference is now concluded. Thank you very much for attending today's presentation. You may now disconnect.

Okay.

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