Production was 22.5 billion cubic feet (Bcf), or 247.0 million cubic feet (MMcf) per day, for the quarter ended June 30, 2009. This was another quarterly production record, and 20% higher than the 18.8 Bcf, or 206.5 MMcf per day, for the year-ago quarter.

"CNX Gas continued its operational excellence by safely setting another quarterly production record," said J. Brett Harvey, chairman and chief executive officer. "With our unfolding Marcellus Shale success, we are raising our 2009 production guidance by another 2 Bcf, to 89 Bcf. Also, our excellent hedge position kept us from experiencing the full financial effect of the collapse in spot gas prices. During this period of low prices, our focus is on reducing costs while leasing more Marcellus acreage in southwestern Pennsylvania. On July 28, we announced the leasing of an additional 40,000 acres with Marcellus Shale potential."

Earnings for the quarter were negatively affected by several items. The company took a $6 million charge for dry hole and exploration costs because a test well in the Huron Shale in Virginia proved to be uneconomic. Stock-based compensation expense also increased by $4 million over the year-earlier quarter, primarily due to fair value adjustments associated with the exchange offer to convert CNX Gas performance share units into CONSOL restricted stock units. Short-term incentive compensation was also $2 million higher than the year-earlier quarter due to achieving higher production and other targeted factors.

   TABLE 1   FINANCIAL AND OPERATIONAL RESULTS - Period-To-Period                               Quarter      Quarter   Six Months   Six Months                              Ended        Ended      Ended        Ended                             June 30,     June 30,   June 30,     June 30,                              2009         2008       2009         2008                             -------      -------   ---------    ----------    Total Revenue              $161.6       $205.8     $340.0       $366.4    and Other Income          ------       ------     ------       ------   Net Income attributable     $33.0        $64.3      $87.9       $114.2    to CNX Gas shareholders    -----        -----      -----       ------   Earnings per Share -    Diluted                    $0.22        $0.42      $0.58        $0.75                               -----        -----      -----        -----   Net Cash from Operating    Activities                 $87.6       $110.6     $214.1       $186.8                               -----       ------     ------       ------   EBITDA                      $79.9       $122.6     $194.0       $220.8                               -----       ------     ------       ------   EBIT                        $55.0       $106.0     $146.3       $188.2                               -----       ------     ------       ------   Total Period Production    (Bcf)                       22.5         18.8       44.5         34.7                                ----         ----       ----         ----   Average Daily Production    (MMcf)                     247.0        206.5      245.9        190.4                               -----        -----      -----        -----   Capital Expenditures        $80.2       $149.3     $213.8       $235.8                               -----       ------     ------       ------   

Financial results are in millions of dollars except per share amounts. Production results are net of royalties.

Quarter-to-Quarter Discussion of Price and Costs Per Net Mcf

The average price realized for the company's gas production was $6.71 per Mcf for the quarter ended June 30, 2009, or $2.92 lower than the $9.63 per Mcf received for the quarter ended June 30, 2008. The average realized price for the just-ended quarter included 12.5 Bcf hedged at $8.96 per Mcf. Unhedged production was sold at substantially lower prices.

Unit operating costs for company production, exclusive of royalties, were $3.57 per Mcf in the just-ended quarter, or a decrease of $0.12 from the $3.69 per Mcf for the quarter ended June 30, 2008. Overall, production costs were negatively affected by the deferral of nearly 1.0 Bcf during the quarter from the idling of Buchanan Mine. This mine-related gas is among the lowest cost gas produced by CNX Gas.

Pre-tax unit margins for company production were $3.14 per Mcf in the June 30, 2009 quarter, a decrease of $2.80 from the $5.94 per Mcf in the quarter ended June 30, 2008.

   TABLE 2   PRICE AND COST DATA PER NET MCF - Period-To-Period Comparison                              Quarter     Quarter   Six Months   Six Months                              Ended        Ended      Ended        Ended                             June 30,     June 30,   June 30,     June 30,                              2009         2008       2009         2008                             -------      -------   ---------    ---------   Average Sales Price        $6.71       $9.63       $7.04        $8.99                              -----       -----       -----        -----   Costs - Production      Lifting                 $0.53       $0.64       $0.51        $0.57                              -----       -----       -----        -----      Production Taxes        $0.07       $0.31       $0.05        $0.28                              -----       -----       -----        -----      DD&A                    $0.87       $0.62       $0.84        $0.65                              -----       -----       -----        -----   Total Production Costs     $1.47       $1.57       $1.40        $1.50                              -----       -----       -----        -----   Costs - Gathering      Operating Costs         $0.81       $0.93       $0.80        $0.89                              -----       -----       -----        -----      Transportation          $0.23       $0.14       $0.22        $0.13                              -----       -----       -----        -----      DD&A                    $0.24       $0.26       $0.23        $0.29                              -----       -----       -----        -----   Total Gathering Costs      $1.28       $1.33       $1.25        $1.31                              -----       -----       -----        -----    Costs   Administration     $0.82       $0.79       $0.78        $0.80                              -----       -----       -----        -----    Total Costs                $3.57       $3.69       $3.43        $3.61                              -----       -----       -----        -----    Margin                     $3.14       $5.94       $3.61        $5.38                              -----       -----       -----        -----    

Note: Costs Administration exclude incentive compensation and other corporate items.

Unit lifting costs were lower, in part, because of fewer workovers conducted in the just-ended quarter. Higher production volumes also helped to lower unit lifting costs.

Unit production taxes were much lower in the just-ended quarter because they are calculated on average realized price before the effect of hedging. Due to market conditions, these prices were significantly lower in the just-ended quarter.

Unit production DD&A was higher in the just-ended quarter because of the impact of investment in 2008 relative to commensurate 2008 reserve additions. This ratio was above historical levels in 2008, resulting in a higher unit charge in 2009.

Gathering operating costs were lower partly as the result of turn backs of rented compressors, as the pace of drilling slowed for low-pressure coalbed methane wells. Higher production volumes also helped to lower unit costs.

Firm transportation costs have increased due to acquiring additional capacity in the Northern Appalachian region in anticipation of greater production volumes.

Operations Update

During the second quarter, CNX Gas employees worked another quarter without incurring a lost time accident. This raises the cumulative time worked by employees without a lost time incident to over 3.8 million hours.

CNX Gas drilled 55 vertical frac wells in its Virginia CBM Operations during the second quarter and 118 wells in the first six months. CNX Gas expects to drill 175 wells in Virginia in 2009. Results are now in from two horizontal CBM wells drilled late in 2008. One well targeted the Pochahontas #3 seam (the mineable seam), while the second targeted the (shallower) Pocahontas #4 seam. Both achieved peak daily production of 400 Mcf. One is producing 328 Mcf per day after 116 days, while the other is producing 230 Mcf per day after 191 days.

In the Marcellus Shale, CNX Gas drilled, completed, and brought online its sixth, seventh, and eighth horizontal wells during the quarter. The peak daily production from these wells was 3.7 MMcf, 3.2 MMcf, and 4.1 MMcf, respectively.

Drilling and completion costs continue to improve. As previously reported, the fifth well in the table cost $3.8 million. The wells drilled during this quarter cost $3.5 million or less.

The table below summarizes results since the inception of the company's horizontal Marcellus Shale program:

   TABLE 3   HORIZONTAL MARCELLUS SHALE PROGRAM STATISTICS                                                        July 13   Cumulative                                           Peak Daily   Daily    Production                                           Production Production   (MMcf)   Well Name      Turn in date   Peak date   (MMcf)    (MMcf) Through July 13   ---------      ------------   ---------   ------    ------  --------------   1. CNX#3          10/5/08     12/16/08      6.6       1.8        681   2. CNX#2          1/28/09      2/13/09      2.5       1.4        298   3. CNX#2A         2/13/09       3/4/09      2.0       1.2        232   4. GH10CV          4/6/09       4/9/09      5.5       1.9        292   5. GH10ACV        4/18/09      4/24/09      5.2       2.4        293   6. GH11CV         5/30/09       6/3/09      3.7       1.9        103   7. GH11ACV        5/30/09       6/3/09      3.2       2.2        110   8. GH10BCV        6/27/09      7/15/09      4.1       3.5         44      Average Peak                             4.1   

The company is now using a top hole rig to drill the 6,000-ft. vertical portion of its Marcellus Shale wells, while using its one horizontal rig to drill into the curve and the nearly 3,000-ft. lateral. This paired rig concept has had the effect of increasing the number of horizontal wells that the company can now drill every month from one to two. It is also helping to lower costs.

CNX Gas is also placing more wells on a single pad. The eighth well drilled was the third to be drilled on a single pad. By year-end, CNX Gas plans to increase the number of horizontal Marcellus Shale wells drilled from a single pad to six.

"CNX Gas continues to refine its drilling techniques in the Marcellus Shale," noted J. Brett Harvey. "As a result, our finding costs in the Marcellus Shale could now be below $1.00 per Mcf, assuming costs continue trending below $3.5 million, and reserves exceed the type curve of 3.5 Bcf per well. With our having completed eight successful horizontal wells, I feel that CNX Gas is achieving results as good as any of our competitors.