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Acquisitions and Dispositions | 6 Months Ended
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Jun. 30, 2018
Business Combinations [Abstract] |
Acquisitions And Dispositions | ACQUISITIONS AND DISPOSITIONS: On May 2, 2018 CNX closed on an Asset Exchange Agreement (the “AEA”), with HG Energy II Appalachia, LLC (“HG Energy”), pursuant to which, among other things, HG Energy (i) paid to CNX approximately $7,000 and (ii) assigned to CNX certain undeveloped Marcellus and Utica acreage in Southwest Pennsylvania, in exchange for CNX (x) assigning its interest in certain non-core midstream assets and surface acreage and (y) releasing certain HG Energy oil and gas acreage from dedication under a gathering agreement that is partially held, indirectly, by CNX. In connection with the transaction, CNX also agreed to certain transactions with CNXM, including the amendment of the existing gas gathering agreement between CNX and CNXM to increase the existing well commitment by an additional forty wells. The net gain on the sale was $286 and is included in the Gain on Asset Sales line of the Consolidated Statements of Income. As a result of the AEA, CNX determined that the carrying value of a portion of the customer relationship intangible assets that were acquired in connection with the Midstream acquisition discussed below (see also Note 19 - Goodwill and Other Intangible Assets) exceeded their fair value, and recognized an impairment of approximately $18,650 which is included in the Impairment of Other Intangible Assets line of the Consolidated Statements of Income. On March 30, 2018, CNX Gas completed the sale of substantially all of its shallow oil and gas assets and certain Coalbed Methane (CBM) assets in Pennsylvania and West Virginia for $89,296 in cash consideration. In connection with the sale, the buyer assumed approximately $196,514 of asset retirement obligations. The net gain on the sale was $4,751 and is included in the Gain on Asset Sales line of the Consolidated Statements of Income. On December 14, 2017, CNX Gas entered into a purchase agreement with NBL Midstream, LLC (Noble), pursuant to which CNX Gas acquired Noble’s 50% membership interest in CONE Gathering LLC (CNX Gathering), for a cash purchase price of $305,000 and the mutual release of all outstanding claims (the "Midstream Acquisition"). CNX Gathering owns a 100% membership interest in CONE Midstream GP LLC (the general partner), which is the general partner of CONE Midstream Partners LP (CNXM or the Partnership), which is a publicly traded master limited partnership formed in May 2014 by CNX Gas and Noble. In conjunction with the Midstream Acquisition, which closed on January 3, 2018, the general partner, the Partnership and CONE Gathering LLC changed their names to CNX Midstream GP LLC, CNX Midstream Partners LP, and CNX Gathering LLC, respectively. Prior to the Midstream Acquisition, the Company accounted for its 50% interest in CNX Gathering LLC as an equity method investment as the Company had the ability to exercise significant influence, but not control, over the operating and financial policies of the midstream operations. In conjunction with the Midstream Acquisition, the Company obtained a controlling interest in CNX Gathering LLC and, through CNX Gathering's ownership of the general partner, control over the Partnership. Accordingly, the Midstream Acquisition has been accounted for as a business combination using the acquisition method of accounting pursuant to ASC Topic 805, Business Combinations, or ASC 805. ASC 805 requires that, in such business combination achieved in stages (or step acquisition), previously held equity interests are remeasured at fair value and any difference between the fair value and the carrying value of the equity interest held be recognized as a gain or loss on the statement of income. The fair value assigned to the previously held equity interest in CNX Gathering and CNXM for purposes of calculating the gain or loss was $799,033 and was determined using the income approach, based on a discounted cash flow methodology. The resulting gain on remeasurement to fair value of the previously held equity interest in CNX Gathering and CNXM of $623,663 is included in the Gain on Previously Held Equity Interest line of the Consolidated Statements of Income. The fair values of the previously held equity interests were based on inputs that are not observable in the market and therefore represent Level 3 inputs (See Note 14 - Fair Value of Financial Instruments). These fair values were measured using valuation techniques that convert future cash flows into a single discounted amount. Significant inputs to the valuation included estimates of: (i) gathering volumes; (ii) future operating costs; and (iii) a market-based weighted average cost of capital. These inputs required significant judgments and estimates by management, are still under review, and are subject to change. These inputs have a significant impact on the valuation of the previously held equity interests and future changes may occur. The estimated fair value of midstream facilities and equipment, generally consisting of pipeline systems and compression stations, were estimated using the cost approach. Significant unobservable inputs in the estimate of fair value include management's assumptions about the replacement costs for similar assets, the relative age of the acquired assets and any potential economic or functional obsolescence associated with the acquired assets. As a result, the estimated fair value of the midstream facilities and equipment represents a Level 3 fair value measurement. As part of the preliminary purchase price allocation, the Company identified intangible assets for customer relationships with third party customers. The fair value of the identified intangible assets was determined using the income approach which requires a forecast of the expected future cash flows generated and an estimated market-based weighted average cost of capital. Significant unobservable inputs in the determination of fair value include future revenue estimates, future cost assumptions, and estimated customer retention rates. As a result, the estimated fair value of the identified intangible assets represents a Level 3 fair value measurement. Differences between the preliminary purchase price allocation and the final purchase price allocation may change the amount of intangible assets and goodwill ultimately recognized in conjunction with the Midstream Acquisition. The noncontrolling interest in the acquired business is comprised of the limited partner units in CNXM, which were not acquired by the Company. The CNXM limited partner units are actively traded on the New York Stock Exchange, and were valued based on observable market prices as of the transaction date and therefore represent a Level 1 fair value measurement. Allocation of Purchase Price (Midstream Acquisition) The following table summarizes the purchase price and estimated values of assets and liabilities assumed based on the fair value as of January 3, 2018, with any excess of the purchase price over the estimated fair value of the identified net assets acquired recorded as goodwill. The preliminary purchase price allocation will be subject to further refinement, which may result in material changes. Estimated Fair Value of Consideration Transferred:
Cash Consideration | $ | 305,000 |
CNX Gathering Cash on Hand at January 3, 2018 Distributed to Noble | 2,620 |
Fair Value of Previously Held Equity Interest | 799,033 |
Total Estimated Fair Value of Consideration Transferred | $ | 1,106,653 |
The following is a summary of the preliminary estimated fair values of the net assets acquired:
Fair Value of Assets Acquired: |
Cash and Cash Equivalents | $ | 8,348 |
Accounts and Notes Receivable | 21,199 |
Prepaid Expense | 2,006 |
Other Current Assets | 163 |
Property, Plant and Equipment, Net | 1,043,340 |
Intangible Assets | 128,781 |
Other | 593 |
Total Assets Acquired | 1,204,430 |
Fair Value of Liabilities Assumed: |
Accounts Payable | 26,059 |
CNXM Revolving Credit Facility | 149,500 |
Total Liabilities Assumed | 175,559 |
Total Identifiable Net Assets | 1,028,871 |
Fair Value of Noncontrolling Interest in CNXM | (718,577 | )
Goodwill | 796,359 |
Net Assets Acquired | $ | 1,106,653 |
Post-Acquisition Operating Results (Midstream Acquisition) The Midstream Acquisition contributed the following to the Company's Midstream segment for the three and six months ended June 30, 2018.
| Three Months Ended |  | Six Months Ended
| June 30, 2018 |  | June 30, 2018
Midstream Revenue | $ | 61,325 |  |  | $ | 125,503 |
Earnings From Continuing Operations Before Income Tax | $ | 27,795 |  |  | $ | 63,329 |
Unaudited Pro Forma Information (Midstream Acquisition) The following table presents unaudited pro forma combined financial information for the three and six months ended June 30, 2017, which presents the Company’s results as though the Midstream Acquisition had been completed at January 1, 2017. The pro forma combined financial information has been included for comparative purposes and is not necessarily indicative of the results that might have actually occurred had the acquisition been completed at January 1, 2017; furthermore, the financial information is not intended to be a projection of future results.
| Pro Forma
(in thousands, except per share data) (unaudited) | Three Months Ended June 30, 2017 |  | Six Months Ended June 30, 2017
Pro Forma Total Revenue and Other Operating Income | $ | 395,774 |  |  | $ | 740,411 |
Pro Forma Net Income from Continuing Operations | $ | 150,789 |  |  | $ | 92,979 |
Less: Pro Forma Net income Attributable to Noncontrolling Interests | $ | 18,720 |  |  | $ | 38,134 |
Pro Forma Net Income from Continuing Operations Attributable to CNX | $ | 132,069 |  |  | $ | 54,845 |
Pro Forma Income per Share from Continuing Operations (Basic) | $ | 0.58 |  |  | $ | 0.24 |
Pro Forma Income per Share from Continuing Operations (Diluted) | $ | 0.58 |  |  | $ | 0.24 |

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- Definition This element may be used to capture disclosure pertaining to acquisitions and dispositions. For acquisitions, description of a business acquisition (or series of individually immaterial business combinations) planned, initiated, or completed during the period, including background, timing, and allocation of acquisition costs. For dispositions, disclosure includes the facts and circumstances leading to the completed or expected disposal, manner and timing of disposal, the gain or loss recognized in the income statement and the income statement caption that includes that gain or loss, and the segment in which the disposal group was reported. + References No definition available. + Details
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