CONSOL Energy (CNX) Will Pursue Formation of MLP; Approves $250M Buyback

CONSOL Energy (NYSE: CNX) announced that its Board of Directors has authorized management to pursue the formation of a master limited partnership (MLP) for the company's thermal coal business. The purpose of the MLP would be to own interests in certain of CONSOL Energy's thermal coal properties and related mining operations located in Pennsylvania, including its Bailey Mine, Enlow Fork Mine, Harvey Mine and the related preparation plant. CONSOL Energy expects to commence an initial public offering of the MLP in mid-2015. Following the closing of the initial public offering by the MLP, CONSOL Energy would own the general partner of the MLP, any incentive distribution rights and a majority of the limited partner interests of the MLP.

CONSOL Energy also announced today that its Board of Directors has authorized management to separately pursue the structuring and formation of a subsidiary entity for the purpose of owning CONSOL Energy's metallurgical coal properties and related mining operations, with a view to conducting an initial public offering of up to 20% of the subsidiary's equity in the second half of 2015. The subsidiary's assets would include CONSOL Energy's Buchanan Mine and related preparation plant and its interest in its Western Allegheny Energy joint venture.

CONSOL Energy believes that these transactions would achieve four objectives: (i) they bring the value of its thermal and metallurgical coal assets forward, thereby increasing CONSOL's net asset value per share, (ii) they improve transparency into the value of these assets, which will permit a more accurate sum-of-the-parts valuation, (iii) they provide additional vehicles for accessing the capital markets on favorable terms, and (iv) they allow CONSOL to retain control of these assets so it can continue to realize the operational synergies that exist between its natural gas and coal businesses. CONSOL Energy would designate separate management teams to run each of these businesses so as to most effectively maintain operational focus.

After giving effect to these transactions, CONSOL Energy would consist primarily of (i) its core oil and gas exploration and production business, (ii) its interest in CONE Midstream Partners LP (NYSE: CNNX), (iii) a controlling interest in its cash flow generating thermal coal MLP and (iv) a controlling interest in its metallurgical coal subsidiary.

Separately, CONSOL Energy also announced that its Board of Directors has approved a two-year share repurchase program of up to $250 million. The repurchases will be effected from time-to-time on the open market or in privately negotiated transactions or under a Rule 10b5-1 plan. The timing of the repurchases will be based on a number of factors, including the company's stock price, the company's financial outlook and alternative investment options. The share repurchase program and the Board's authorization of the program may be modified, suspended or discontinued at any time. The Board of Directors will continue to evaluate the size of the stock repurchase program based on CONSOL's free cash flow position, leverage ratio and capital plans.

"In addition to focusing on the steady execution of our core businesses, we have been hard at work on creating structural transparency, bringing value forward and taking advantage of opportunities for share count reduction," commented CONSOL Energy President and Chief Executive Officer Nick DeIuliis. "The culmination of the structural moves completed in 2014 and anticipated for 2015 are intended to improve CONSOL's valuation by providing straightforward, sum-of-the-parts analytics and reducing the risk to the E&P growth plan, which we continue to target at 30% year-over-year growth in 2015 and 2016. The stock repurchase program reaffirms our belief in the value inherent in CONSOL Energy, and our commitment to returning value to our shareholders."

Further, these restructuring transactions reaffirm CONSOL Energy's commitment to our coal businesses," said Mr. DeIuliis. "We will retain control so that we can continue to offer our customers the same reliability that they have come to expect from CONSOL Energy as well as the continued unique ability to supply those customers with both coal and gas as their needs demand and the market dictates."

If CONSOL Energy effects an initial public offering of a thermal coal MLP, CONSOL anticipates that it would reduce or eliminate its current regular dividend effective in the first quarter after the initial public offering. The reason for this change in dividend policy is twofold: (i) the stock repurchase program announced today is a more efficient method to return capital to shareholders than a dividend, and (ii) yield-oriented investors in CONSOL will have other investment options through CONE Midstream Partners LP and, if completed, the proposed thermal coal MLP and/or its metallurgical coal subsidiary.

Whether and when CONSOL Energy proceeds with initial public offerings of the thermal coal MLP and metallurgical coal subsidiary are subject to a number of factors, including prevailing market conditions and the approval of CONSOL Energy's Board of Directors.

No registration statement relating to the securities that would be sold in either offering has been filed with the Securities and Exchange Commission or become effective. This press release does not constitute an offer to sell, or the solicitation of an offer to buy, any securities. Any offering will be made only by means of a prospectus. This announcement is being issued pursuant to, and in accordance with, Rule 135 under the Securities Act of 1933, as amended.

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