Why CONSOL Energy’s Enterprise Multiple Is Falling



CONSOL Energy’s enterprise multiple

As of 3Q15, CONSOL Energy’s (CNX) EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) ratio was around 7.6x, which is much lower when compared with CNX’s historical average EV-to-EBITDA ratio of ~11.8x over the last five years. As seen in the below chart, for 2015, CNX’s EV-to-EBITDA ratio has been decreasing for the last three quarters, which was mainly due to the much steeper fall in EV than EBITDA during the period.

Pioneer Natural Resources (PXD), EOG Resources (EOG), and Murphy Oil (MUR), other upstream companies within the S&P 500 (SPY), have enterprise multiples of ~10x, ~7x, and ~3.2x, respectively.

CNX’s forward EV-to-EBITDA multiple is ~7x, which is lower than its own historical average of ~11.8x. For 2016, Wall Street analysts estimate CNX’s EBITDA to be higher by ~7% YoY at ~$795 million.

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The enterprise multiple

The EV-to-EBITDA ratio is also called an “enterprise multiple,” and analysts tend to prefer it over the PE ratio, especially for upstream companies, because it takes into account a company’s debt. With the enterprise multiple, enterprise value is the summation of market capitalization and market value of debt minus total cash and cash equivalents.

CNX’s proved reserves

As of December 31, 2014, CONSOL Energy’s upstream proved reserves totaled ~6.8 trillion cubic feet equivalent, ~20% more when compared with levels at the end of 2013. As of December 31, 2014, ~93% of CNX’s upstream proved reserves consisted of natural gas and ~7% of liquids. All of CNX’s upstream proved reserves are located in the US. According to CNX’s 2014 annual report, the discounted value of its upstream reserve base at the end of 2014 was ~$4.9 billion. Given the decline in commodity prices in 2015, this value will be much lower today.

As of December 31, 2014, CNX’s total recoverable coal reserves totaled 3.2 billion tons.


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