1335793--2/21/2006--CNX_Gas

related topics

{gas, price, oil}

{cost, contract, operation}

{financial, litigation, operation}

{stock, price, operating}

{cost, regulation, environmental}

{debt, indebtedness, cash}

{property, intellectual, protect}

{loan, real, estate}

{system, service, information}

{capital, credit, financial}

{competitive, industry, competition}

{investment, property, distribution}

Natural gas and oil prices are volatile, and a decline in natural gas and oil prices would significantly affect our financial results and impede our growth. We face uncertainties in estimating proven recoverable gas reserves, and inaccuracies in our estimates could result in lower than expected reserve quantities and a lower present value of our reserves. Unless we replace our natural gas reserves, our reserves and production will decline, which would adversely affect our business, financial condition, results of operations and cash flows. Our exploration and development activities may not be commercially successful. Our business depends on transportation facilities owned by others. Disruption of, capacity constraints in, or proximity to pipeline systems could limit our sales and increase costs of producing our gas. We operate in a highly competitive environment and many of our competitors have greater resources than we do. The coal beds from which we produce methane gas frequently contain water that may hamper our ability to produce gas in commercial quantities. We may be unable to retain our existing senior management team and/or our key personnel who have expertise in coalbed methane extraction and our failure to continue to attract qualified new personnel could adversely affect our business. We are party to, and may in the future become party to, joint ventures and other arrangements with third parties that may impact our operations and our financial performance. Government laws, regulations and other legal requirements relating to protection of the environment, health and safety matters and others that govern our and CONSOL Energy s businesses increase our costs and may restrict our operations. We must obtain governmental permits and approvals for drilling operations, which can be a costly and time consuming process and result in restrictions on our operations. We may incur additional costs to produce gas because our chain of title work for gas rights in some of our properties may be inadequate or incomplete. We need to use unproven technologies to extract coalbed methane on some of our properties. Other persons could have ownership rights in our advanced extraction techniques which could force us to cease using those techniques or pay royalties. Currently the vast majority of our producing properties are located in two counties in southwestern Virginia, making us vulnerable to risks associated with having our production concentrated in one area. We do not insure against all potential operating risks. We may incur substantial losses and be subject to substantial liability claims as a result of our natural gas operations. Risks Relating to Our Relationship with CONSOL Energy Our principal stockholder, CONSOL Energy, is in a position to affect our ongoing operations, corporate transactions and other matters, and some of our directors also serve on its board of directors and/or are employees of CONSOL Energy, creating potential conflicts of interest. Potential conflicts may arise between us and CONSOL Energy that may not be resolved in our favor. Our intercompany agreements with CONSOL Energy are not the result of arm s-length negotiations. Our agreements with CONSOL Energy may limit our ability to obtain capital, make acquisitions or effect other business combinations. Our prior and continuing relationship with CONSOL Energy exposes us to risks attributable to CONSOL Energy s businesses. CONSOL Energy Inc. has advised us that as of the date of this Annual Report, CONSOL Energy has no plan or intention regarding its shares of our common stock and if CONSOL Energy were to make a distribution or otherwise dispose of its remaining ownership interest in us, our common stock price could be adversely affected. We must coordinate some of our gas production activities with coal mining activities in the same area, which could adversely affect our financial condition or operations. We may lose certain synergistic advantages by separating ourselves from our current owner.

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1335793--2/21/2006--CNX_Gas_CORP