Cnx Resources's Business Segments

We are a multi-fuel energy producer and energy services provider that primarily serves the electric power generation industry in the United States. That industry generates approximately two-thirds of its output by burning coal or gas, the two fuels we produce. At December 31, 2005, we produced high-Btu bituminous coal from 17 mining complexes in the United States, including joint ventures. Coal produced from our mines has a high-Btu content which creates more energy per unit when burned compared to coals with lower Btu content. As a result, coals with greater Btu content can be more efficient to use. We are the majority shareholder (81.5%) of CNX Gas Corporation. CNX Gas produces pipeline-quality coalbed methane gas from our coal properties in Pennsylvania, Virginia and West Virginia and conventional gas from properties in Tennessee and Virginia. We believe that the use of coal and gas to generate electricity will grow as demand for power increases.

Historically, we rank among the largest coal producers in the United States based upon total revenue, net income and operating cash flow. Our production of approximately 69 million tons of coal in 2005 accounted for approximately 6% of the total tons produced in the United States and approximately 14% of the total tons produced east of the Mississippi River during 2005. We are one of the premier coal producers in the United States by several measures:

• We mine more high-Btu bituminous coal than any other United States producer;

• We are the largest coal producer east of the Mississippi River;

• We have the second largest amount of recoverable coal reserves among United States coal producers; and

• We are the largest United States producer of coal from underground mines.

CNX Gas also ranks as one of the largest coalbed methane gas companies in the United States based on both their proved reserves and their current daily production. Our position as a gas producer is highlighted by several measures:

• Our principal coalbed methane operations produce gas from coal seams (single layers or stratum of coal) with a high gas content;

• We currently have approximately 173 million cubic feet of gross average daily production;

• At December 31, 2005, we operated 2,073 wells connected by approximately 1,000 miles of gathering lines and associated infrastructure;

• Our facilities have the capacity to transport 250 million cubic feet of gas per day; and

• We controlled one of the largest coalbed methane reserve bases among publicly traded oil and gas companies in the United States with approximately 1.1 trillion cubic feet of net proved reserves of gas at December 31, 2005.

Additionally, we provide energy services, including terminal services, industrial supply services and coal waste disposal services.

CONSOL Energy has two principal business units: Coal and Gas. The principal activities of the Coal unit are mining, preparation and marketing of steam coal, sold primarily to power generators, and metallurgical coal, sold to metal and coke producers. The Coal unit includes four reportable segments. These reportable segments are Northern Appalachian, Central Appalachian, Metallurgical and Other Coal. Each of these reportable segments includes a number of operating segments (mines). For the year ended December 31, 2005, the Northern Appalachian aggregated segment includes the following mines: Shoemaker, Blacksville #2, Robinson Run, McElroy, Loveridge, Bailey, Enlow Fork, Mine 84 and Mahoning Valley. For the year ended December 31, 2005, the Central Appalachian aggregated segment includes the following mines: Jones Fork, Mill Creek and Wiley-Mill Creek. For the year ended December 31, 2005, the Metallurgical aggregated segment includes the following mines: Buchanan, Amonate and V.P. #8. The Other Coal segment includes our purchased coal activities, idled mine cost, coal segment business units not meeting aggregation criteria, as well as various other activities assigned to the coal segment but not allocated to each individual mine. The principal activity of the Gas unit is to produce pipeline quality methane gas for sale primarily to gas wholesalers.

Our gas operations are primarily conducted by CNX Gas Corporation, an 81.5% subsidiary of CONSOL Energy. CONSOL Energy primarily produces coalbed methane, which is gas that resides in coal seams. In the eastern United States, conventional natural gas fields typically are located in various types of sedimentary formations at depths ranging from 2,000 to 15,000 feet. Exploration companies often put their capital at risk by searching for gas in commercially exploitable quantities at these depths. By contrast, gas in the coal seams that we drill or anticipate drilling is typically in formations less than 2,500 feet deep which are usually better defined than deeper formations. CONSOL Energy believes that this contributes to lower exploration costs than those incurred by producers that operate in deeper, less defined formations.

Coal is transported from CONSOL Energy’s mining complexes to customers by means of railroad cars, river barges, trucks, conveyor belts or a combination of these means of transportation. We employ transportation specialists who negotiate freight and equipment agreements with various transportation suppliers, including railroads, barge lines, terminal operators, ocean vessel brokers and trucking companies.

CONSOL Energy enters into various physical gas supply transactions with both gas marketers and end users for terms varying in length at both fixed and variable prices. Reserves and production estimates are believed to be sufficient to satisfy these obligations. In the past, other than pipeline outages related to maintenance, we have not failed to deliver quantities required under contract. CONSOL Energy has also entered into various gas swap transactions that qualify as financial cash flow hedges. These gas swap transactions exist parallel to the underlying physical transactions. These financial, as well as physical hedges represented approximately 70% of our produced gas sales volumes.

Competition

The United States coal industry is highly competitive, with numerous producers in all coal producing regions. CONSOL Energy competes against other large producers and hundreds of small producers in the United States and overseas. The five largest producers are estimated by the 2005 National Mining Association Survey to have produced approximately 54% (based on tonnage produced) of the total United States production in 2004. The U.S. Department of Energy reported 1,357 active coal mines in the United States in 2004, the latest year for which government statistics are available. Demand for our coal by our principal customers is affected by:

• the price of competing coal and alternative fuel supplies, including nuclear, natural gas, oil and renewable energy sources, such as hydroelectric power;

• coal quality;

• transportation costs from the mine to the customer; and

• the reliability of supply.

Continued demand for CONSOL Energy’s coal and the prices that CONSOL Energy obtains are affected by demand for electricity, environmental and government regulation, technological developments and the availability and price of competing coal and alternative fuel supplies. We sell coal to foreign electricity generators and to the more specialized metallurgical coal market, both of which are significantly affected by international demand and competition.

Competition throughout the country is regionalized. We operate in the eastern United States. CONSOL Energy believes that the gas market is highly fragmented and not dominated by any single producer. We believe that several of our competitors have devoted far greater resources than we have to gas exploration and development. CONSOL Energy believes that competition within our market is based primarily on price and the proximity of gas fields to customers.

CNX Resources Corporation: An Extensive Overview of Segments, Products, and Services

Corporate Overview

CNX Resources Corporation specializes in the exploration, production, and marketing of natural gas, particularly focusing on the Marcellus and Utica shale formations. The company is also involved in coal production and related operations. CNX has developed a robust portfolio that includes a variety of assets and operational expertise catering to natural gas production, transportation, and ancillary services. The corporations activities can be broadly categorized into two main segments: Natural Gas Operations and Coal Operations.

Natural Gas Operations

The Natural Gas segment is the backbone of CNXs infrastructure, involving significant exploration and production activities. This segment is primarily focused on:

1. Natural Gas Production:
- CNX is engaged in the production of natural gas from its extensive holdings in the Marcellus and Utica shale plays. The company employs advanced drilling technologies, including horizontal drilling and hydraulic fracturing, to optimize production.

2. Natural Gas Processing:
- The company operates gas processing facilities that enable the extraction of natural gas liquids (NGLs) from raw natural gas. These facilities streamline the process and enhance the economic value derived from production.

3. Midstream Services:
- CNX provides extensive midstream services, which include the transportation, storage, and marketing of natural gas through a network of pipelines. The company focuses on creating a facilitating structure to ensure efficient movement of gas from production sites to end-users.

4. Reservoir Management:
- CNX Resources applies advanced reservoir engineering techniques to maximize resource recovery and optimize production rates from its natural gas reservoirs.

5. Sustainability Initiatives:
- The company actively engages in efforts to minimize the environmental impact of its operations, including reducing greenhouse gas emissions, through innovative practices and technologies aimed at sustainability.

6. Research and Development:
- CNX invests in R&D to explore more efficient extraction methods and technologies for natural gas production, ultimately contributing to the long-term resilience and growth of its operations.

Coal Operations

Although CNX has shifted its primary focus to natural gas, it maintains a coal division that plays a role in its overall asset portfolio:

1. Coal Extraction and Production:
- CNX Resources manages coal extraction primarily from its operations in the Central Appalachian region. The coal division focuses on both metallurgical and thermal coal production.

2. Sales and Marketing:
- The company engages in coal sales activities, catering to various industries, including steel manufacturing and electricity generation. CNX employs a varied pricing strategy, which may include fixed price contracts or indexed pricing based on market conditions.

3. Transportation:
- Coal is transported from CNX’s mining locations to customers using a range of methods, including rail and truck, ensuring timely and efficient delivery of products.

4. Coal Reserves Management:
- CNX monitors its coal reserves closely, with processes in place for managing and assessing its mining permits to ensure compliance and operational continuity.

Products and Services

The core products and services offered by CNX are designed to meet a diverse range of energy needs:

1. Natural Gas:
- The companys most significant offering, natural gas is produced and marketed to wholesalers, utilities, and industrial customers.

2. Natural Gas Liquids (NGLs):
- Extracted from natural gas processing operations, CNXs portfolio includes a range of NGLs, such as propane, butane, and ethane, marketed for various industrial applications.

3. Methane Gas:
- CNX produces pipeline-quality methane gas from its coalbed methane operations, highlighting its capabilities in responsible and efficient extraction practices.

4. Coal:
- Thermal and metallurgical coal is produced and marketed, with CNX serving customers in energy and industrial sectors.

5. Environmental Management Services:
- The company provides initiatives and services aimed at reducing the environmental impact of its operations, given the increasing emphasis on sustainability in the energy sector.

Conclusion

CNX Resources Corporation operates a diversified portfolio focused primarily on natural gas, supported by a coal operations segment. Through strategic management of its resources, advanced technological applications, and a commitment to sustainability, CNX aims to secure its position as a leader in the energy industry while addressing the needs of its customers and stakeholders.