Variable Interest Entities

6 Months Ended

Jun. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

VARIABLE INTEREST ENTITIES:

The Company determined CNXM to be a variable interest entity. The Company has the power through its ownership and control of CNXM's general partner (CNX Midstream GP LLC) to direct the activities that most significantly impact CNXM's economic performance. In addition, through its limited partner interest in CNXM, the Company has the obligation to absorb the losses of CNXM and the right to receive benefits in accordance with such interests. As the Company has a controlling financial interest and is the primary beneficiary of CNXM, the Company consolidates CNXM.

The risks associated with the operations of CNXM are discussed in its Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 10, 2020 and its other periodic reports filed thereafter.

On July 26, 2020, CNX entered into an Agreement and Plan of Merger (the “Merger Agreement”). See Note 17 - Subsequent Event for more information.

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

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

•26 million CNXM common units;

•3 million new CNXM Class B units, which will not receive or accrue distributions until January 1, 2022 at which time they will automatically convert into CNXM common units on a one-for-one basis; and

•$135,000 to be paid in three installments as follows: $50,000 due December 31, 2020, $50,000 due December 31, 2021 and $35,000 due December 31, 2022.

As a result of the IDR Elimination Transaction, CNX owns 47.7 million CNXM common units, or approximately 53%, of the outstanding limited partner interests in CNXM, excluding the CNXM Class B units. Prior to the IDR Elimination Transaction, the Company owned approximately 34% of the outstanding limited partner interest and 100% of the general partner interest. Upon conversion of the CNXM Class B units to CNXM common units on January 1, 2022, CNX's ownership will increase to 50.7 million CNXM common units, or approximately 54.6% of the outstanding limited partner interest in CNXM on a proforma basis.

The following table presents amounts included in the Company's Consolidated Balance Sheets that were for the use or obligation of CNXM:


	June 30,		December 31,
	2020		2019
Assets:
Cash	$	989	$	31
Receivables - Related Party	16,583		21,076
Receivables - Third Party	8,615		7,935
Other Current Assets	1,672		1,976
Property, Plant and Equipment, net	1,206,739		1,195,591
Operating Lease ROU Asset	1,594		4,731
Other Assets	2,698		3,262
Total Assets	$	1,238,890	$	1,234,602
Liabilities:
Accounts Payable and Accrued Liabilities	$	31,931	$	67,290
Accounts Payable - Related Party	52,191		4,787
Revolving Credit Facility	319,000		311,750
Long-Term Debt	394,635		394,162
Long-Term Liabilities - Related Party	85,000		—
Total Liabilities	$	882,757	$	777,989

The following table summarizes CNXM's Consolidated Statements of Operations and Cash Flows, inclusive of affiliate amounts:


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020		2019		2020		2019
Revenue
Gathering Revenue - Related Party	$	54,203	$	59,205	$	116,381	$	112,981
Gathering Revenue - Third Party	11,749		18,896		29,702		37,339
Miscellaneous Income	86		—		151		—
Total Revenue	66,038		78,101		146,234		150,320
Expenses
Operating Expense - Related Party	4,367		6,514		8,195		12,062
Operating Expense - Third Party	6,049		6,188		14,645		12,162
General and Administrative Expense - Related Party	2,748		4,027		5,605		7,994
General and Administrative Expense - Third Party	1,585		1,364		4,350		2,900
Loss on Asset Sales and Abandonments	1,663		—		1,652		7,229
Depreciation Expense	8,209		5,860		15,787		11,510
Interest Expense	8,617		7,685		17,410		15,024
Total Expense	33,238		31,638		67,644		68,881
Net Income	$	32,800	$	46,463	$	78,590	$	81,439

Net Cash Provided by Operating Activities	$	45,495	$	74,753	$	85,618	$	124,666
Net Cash Used in Investing Activities	$	(14,297)	$	(104,310)	$	(46,956)	$	(182,867)
Net Cash (Used in) Provided by Financing Activities	$	(35,444)	$	41,164	$	(37,704)	$	65,912

At June 30, 2020 and December 31, 2019, excluding amounts related to the IDR Elimination Transaction, CNX had a net payable of $14,453 and $16,362 respectively, due to CNX Gathering and CNXM, primarily for accrued but unpaid gathering services.