Segment Information

9 Months Ended

Sep. 30, 2018

SEGMENT INFORMATION:

CNX consists of two principal business divisions: Exploration and Production (E&P) and Midstream. The principal activity of the E&P Division, which includes four reportable segments, is to produce pipeline quality natural gas for sale primarily to gas wholesalers. The E&P Division's reportable segments are Marcellus Shale, Utica Shale, Coalbed Methane, and Other Gas. The Other Gas Segment is primarily related to shallow oil and gas production which is not significant to the Company. It also includes the Company's purchased gas activities, unrealized gain or loss on commodity derivative instruments, exploration and production related other costs, impairment of other intangible assets, as well as various other operating activities assigned to the E&P Division but not allocated to each individual segment.

CNX's Midstream Division is the result of CNX's acquisition of Noble's Midstream, LLC's interest in CNX Gathering (See Note 6 - Acquisitions and Dispositions). As part of the acquisition, CNX now has a controlling financial interest and is the primary beneficiary of CNXM, through its approximately 34% ownership of the outstanding limited partner interests (See Note 15 - Variable Interest Entities for more information). The principal activity of the Midstream Division is the ownership, operation, development and acquisition of natural gas gathering and other midstream energy assets, of CNX Gathering and CNXM, which provide natural gas gathering services for the Company's produced gas, as well as for other independent third parties in the Marcellus Shale and Utica Shale in Pennsylvania and West Virginia. Excluded from the Midstream Division are the gathering assets and operations of CNX that have not been contributed to CNX Gathering and CNXM. Prior to the acquisition, the Company accounted for its 50% interest in CNX Gathering LLC as an equity method investment.

The Company's unallocated expenses include other expense, gain on asset sales related to non-core assets, gain on previously held equity interest, loss on debt extinguishment, impairment of other intangible assets and income taxes.

In the preparation of the following information, intersegment sales have been recorded at amounts approximating market prices. Operating profit for each segment is based on sales less identifiable operating and non-operating expenses. Assets are reflected at the division level for E&P and are not allocated between each individual E&P segment. These assets are not allocated to each individual segment due to the diverse asset base controlled by CNX, whereby each individual asset may service more than one segment within the division. An allocation of such asset base would not be meaningful or representative on a segment by segment basis.

Industry segment results for the three months ended September 30, 2018:



	Marcellus Shale		Utica Shale			Coalbed Methane		Other Gas			Total E&P		Midstream		Unallocated		Intercompany Eliminations			Consolidated
Natural Gas, NGLs and Oil Revenue	$	207,407	$	88,039		$	48,471	$	795		$	344,712	$	—	$	—	$	—		$	344,712	(A)
Purchased Gas Revenue	—		—			—		10,560			10,560		—		—		—			10,560
Midstream Revenue	—		—			—		—			—		61,372		—		(41,426		)	19,946
Gain (Loss) on Commodity Derivative Instruments	1,796		(151		)	605		15,755			18,005		—		—		—			18,005
Other Operating Income	—		—			—		3,969			3,969		—		—		(66		)	3,903		(B)
Total Revenue and Other Operating Income	$	209,203	$	87,888		$	49,076	$	31,079		$	377,246	$	61,372	$	—	$	(41,492	)	$	397,126
Earnings (Loss) From Continuing Operations Before Income Tax	$	64,408	$	41,237		$	9,642	$	(60,856	)	$	54,431	$	31,173	$	117,830	$	—		$	203,434
Segment Assets											$	6,256,132	$	1,883,134	$	82,696	$	(12,926	)	$	8,209,036	(C)
Depreciation, Depletion and Amortization											$	111,844	$	7,741	$	—	$	—		$	119,585
Capital Expenditures											$	253,263	$	44,202	$	—	$	—		$	297,465


(A)	Included in Total Natural Gas, NGLs and Oil Revenue are sales of $42,901 to NJR Energy Services Company, which comprises over 10% of sales.


(B)	Includes equity in earnings of unconsolidated affiliates of $1,241 for Total E&P.


(C)	Includes investments in unconsolidated equity affiliates of $19,488 for Total E&P.

Industry segment results for the three months ended September 30, 2017:



	Marcellus Shale		Utica Shale		Coalbed Methane		Other Gas			Total E&P			Unallocated		Consolidated
Natural Gas, NGLs and Oil Revenue	$	133,792	$	43,375	$	46,744	$	10,531		$	234,442		$	—	$	234,442		(D)
Purchased Gas Revenue	—		—		—		13,384			13,384			—		13,384
Gain on Commodity Derivative Instruments	11,299		2,517		3,093		2,274			19,183			—		19,183
Other Operating Income	—		—		—		20,176			20,176			—		20,176
Total Revenue and Other Operating Income	$	145,091	$	45,892	$	49,837	$	46,365		$	287,185		$	—	$	287,185
Earnings (Loss) From Continuing Operations Before Income Tax	$	12,124	$	7,341	$	5,454	$	(71,655	)	$	(46,736	)	$	35,470	$	(11,266	)	(E)
Segment Assets										$	6,191,981		$	2,787,587	$	8,979,568		(F)
Depreciation, Depletion and Amortization										$	102,012		$	—	$	102,012
Capital Expenditures										$	149,500		$	—	$	149,500


(D)	Included in Total Natural Gas, NGLs and Oil Revenue are sales of $34,660 to Direct Energy Business Marketing LLC, which comprises over 10% of sales.


(E)	Includes equity in earnings of unconsolidated affiliates of $12,425 for Total E&P.


(F)	Includes investments in unconsolidated equity affiliates of $190,154 for Total E&P.

Industry segment results for the nine months ended September 30, 2018:



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


(A)	Included in Total Natural Gas, NGLs and Oil Revenue are sales of $158,746 to NJR Energy Services Company, which comprises over 10% of sales.


(B)	Includes equity in earnings of unconsolidated affiliates of $4,688 for Total E&P


(C)	Includes investments in unconsolidated equity affiliates of $19,488 for Total E&P.

Industry segment results for the nine months ended September 30, 2017:



	Marcellus Shale			Utica Shale			Coalbed Methane			Other Gas			Total E&P			Unallocated		Consolidated
Natural Gas, NGLs and Oil Revenue	$	477,391		$	136,493		$	157,344		$	41,283		$	812,511		$	—	$	812,511	(D)
Purchased Gas Revenue	—			—			—			32,678			32,678			—		32,678
(Loss) Gain on Commodity Derivative Instruments	(42,911		)	(2,234		)	(12,894		)	138,547			80,508			—		80,508
Other Operating Income	—			—			—			52,483			52,483			—		52,483
Total Revenue and Other Operating Income	$	434,480		$	134,259		$	144,450		$	264,991		$	978,180		$	—	$	978,180
Earnings (Loss) From Continuing Operations Before Income Tax	$	58,504		$	34,211		$	9,026		$	(236,953	)	$	(135,212	)	$	165,283	$	30,071	(E)
Segment Assets													$	6,191,981		$	2,787,587	$	8,979,568	(F)
Depreciation, Depletion and Amortization													$	289,329		$	—	$	289,329
Capital Expenditures													$	399,462		$	—	$	399,462


(D)	Included in Total Natural Gas, NGLs and Oil Revenue are sales of $121,300 to Direct Energy Business Marketing LLC and $110,548 to NJR Energy Services Company, each of which comprises over 10% of sales.


(E)	Includes equity in earnings of unconsolidated affiliates of $34,810 for Total E&P.


(F)	Includes investments in unconsolidated equity affiliates of $190,154 for Total E&P.

Reconciliation of Segment Information to Consolidated Amounts:

Revenue and Other Operating Income



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2018		2017		2018		2017
Total Segment Revenue from Contracts with External Customers	$	375,218	$	247,826	$	1,193,081	$	845,189
Gain on Commodity Derivative Instruments	18,005		19,183		78,752		80,508
Other Operating Income	3,903		20,176		23,146		52,483
Total Consolidated Revenue and Other Operating Income	$	397,126	$	287,185	$	1,294,979	$	978,180

Income from Continuing Operations Before Income Tax:



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
Segment Income (Loss) Before Income Taxes for reportable business segments:
Total E&P	$	54,431		$	(46,736	)	$	196,366		$	(135,212	)
Midstream	31,173			—			94,502			—
Total Segment Income (Loss) Before Income Taxes for reportable business segments	85,604			(46,736		)	290,868			(135,212		)
Unallocated Expenses:
Other (Expense) Income	(1,105		)	(8,254		)	4,811			(17,803		)
Gain on Certain Asset Sales	134,320			45,743			146,706			184,319
Gain on Previously Held Equity Interest	—			—			623,663			—
Loss on Debt Extinguishment	(15,385		)	(2,019		)	(54,433		)	(1,233		)
Impairment of Other Intangible Assets	—			—			(18,650		)	—
Income (Loss) From Continuing Operations Before Income Tax	$	203,434		$	(11,266	)	$	992,965		$	30,071

Total Assets:



	September 30,
	2018			2017
Segment assets for total reportable business segments
E&P	$	6,256,132		$	6,191,981
Midstream	1,883,134			—
Intercompany Eliminations	(12,926		)	—
Items excluded from segment assets:
Cash and Cash Equivalents	42,672			281,148
Recoverable Income Taxes	40,024			101,501
Discontinued Operations	—			2,404,938
Total Consolidated Assets	$	8,209,036		$	8,979,568