Good day, and welcome to the CEIX Second Quarter 2022 Earnings Conference Call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Nathan Tucker, Director of Finance and Investor Relations. Please go ahead. Pardon me one second. Looks like we are experiencing technical difficulties. Give me one second here. All right, I'm back. Give me one sec.
Thank you and good morning, everyone. Welcome to CONSOL Energy's Second Quarter 2022 Earnings Conference Call. Any forward-looking statements or comments we make about future expectations are subject to some risks, certain of which we have outlined in our press release and in our SEC filings and are considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. We do not undertake any obligations of updating any forward-looking statements for future events or otherwise. We will also be discsing certain non-GAAP financial measures which are defined and reconciled to comparable GAAP financial measures in our press release and furnished to the SEC on Form 8-K, which is also posted on our website. Additionally, we filed our quarterly report on Form 10-Q for the quarter ended June 30, 2022 with the SEC this morning.
You can find additional information regarding the company on our website, www.consolenergy.com, which also includes a supplemental slide deck that was posted this morning. On the call with me today are Jimmy Brock, our Chief Executive Officer, Mitesh Thakkar, our Chief Financial Officer, Dan Connell, our Senior Vice President of Strategy, and Bob Braithwaite, our Senior Vice President of Marketing and Sales. In its prepared remarks, Jimmy will provide a recap of our key achievements during the second quarter of 2022 and specific insights on operations and sales. Mitesh will then provide an update on our balance sheet initiatives, financial performance, and 2022 outlook. He will also highlight the recently completed refinancing of our revolver and accounts receivable securitization facility. Additionally, we will also discuss our recently announced enhanced shareholder return program before Jimmy lays out some key focus areas for the remainder of the year.
After the prepared remarks, there will be a Q&A session in which Dan and Bob will also participate. With that, let me turn it over to our CEO, Jimmy Brock.
Thank you, Nate, and good morning, everyone. CONSOL Energy achieved very strong results on many fronts across the company during the second quarter of 2022. Pennsylvania Mining Complex shipped 6.2 million tons in Q2 of 2022 and for the second consecutive quarter, achieved the highest quarterly average coal revenue per ton sold since CEIX became an independent public company in 2017. After adjusting for the effects of settlements of commodity derivative instruments, we achieved an average realized coal revenue of $72.18 per ton. Additionally, we increased our PAMC forward contracted position by 7.6 million tons through 2025. The CONSOL Marine Terminal shipped 3.8 million tons in Q2 of 2022 and for the second consecutive quarter, generated its highest ever quarterly terminal revenue and adjusted EBITDA.
Financially, CEIX achieved a Q2 2022 Adjusted EBITDA of $216 million and generated $160 million in free cash flow. We also made substantial debt repayments in the quarter while still increasing our unrestricted cash position and liquidity. On the growth and diversification front, our Itmann project made significant strides in the second quarter, and we now expect startup to occur during the third quarter of 2022. Finally, we are very excited to announce that we are implementing a shareholder return program, which will begin in Q3 2022 and return a portion of our free cash flow generation back to shareholders. We will provide more color on this program shortly. Let's now discuss our operational performance in more detail.
Coal production at the Pennsylvania Mining Complex came in at 6.2 million tons in Q2 of 2022, only slightly below our Q1 2022 performance, despite multiple longwall moves in the second quarter compared to zero in the first quarter. Intermittent railroad delays continued during Q2 2022. However, we saw continued improvements from our transportation partners throughout the quarter as they work to increase their staffing levels. As such, productivity at the PAMC has continued to improve since mid-year 2021. Productivity in the first half of 2022, measured as tons per employee hour, improved by 6% compared to the second half of 2021.
On the cost front, our PAMC average cash cost of coal sold per ton for Q2 2022 was $34.81, a significant increase from the $29.91 in Q1 2022. Along with ongoing development costs associated with the fifth longwall, we continue to experience inflationary pressures on goods, services, and repair and maintenance costs at our operations. Additionally, a premature termination of a fixed power contract as a result of a supplier bankruptcy also weighed on our cash costs during the quarter. On a positive note, the development of the fifth longwall continues to progress on track and will provide additional operational flexibility once completed toward the end of this year. The CONSOL Marine Terminal had a throughput volume of 3.8 million tons during Q2 2022, consistent with the prior year period.
However, terminal revenue for the quarter came in at $21.8 million, a significant increase over the $17.4 million in Q2 of 2021. This was driven by a substantial improvement in the throughput rate per ton due to increased export demand and commodity pricing strength. CMT operating cash costs came in at $5.7 million for the quarter, compared to $5.3 million in Q2 of 2021. This resulted in CMT Adjusted EBITDA of $15.1 million in Q2 2022 compared to $11 million in the prior year period. Wrapping up the operations update, our Itmann project development work progressed on schedule in the second quarter, with preparation plant commissioning and production scale-up now expected during the third quarter of 2022. At the end of Q2 2022, relocation and construction of the Itmann prep plant was roughly 80% complete.
The majority of the plant equipment was also installed during the second quarter. The new rail sidings and mainline rail construction activities are nearly complete, with tie-in expected to occur in early August. Additionally, we have continued to build out our workforce and mining equipment fleet in preparation for ramp up by the end of Q3 2022. In Q2 2022, the Itmann mine produced approximately 35,000 tons of low-volatile metallurgical coal and sold 51,000 tons into the export market. Our marketing efforts continued during the second quarter, and the Itmann product has been well-received. In conjunction with the plant start-up in Q3 2022, we have successfully concluded a contract in the domestic market for a portion of the 2022 Itmann volumes, and discussions regarding additional trials for the product are ongoing.
On the marketing front, the demand for our PAMC product remained robust in the second quarter of 2022 due to a persistent lack of supply response in the coal space, coupled with supply shortages across the energy markets more broadly. As such, we sold 6.2 million tons of PAMC coal at an average realized revenue per ton sold of $72.18 in Q2 of 2022, compared to 5.9 million tons at $44.02 in the year-ago period. Additionally, we improved our average realized coal revenue per ton by $12.58 in Q2 of 2022 compared to the first quarter of this year. Looking across the broader thermal coal markets, global demand remains robust as a result of tight supply.
In the U.S., we are seeing domestic coal-fired electric generation units delaying retirements due to energy shortage and grid reliability concerns. Internationally, Europe, Australia, and Japan are all bringing back coal-fired electricity generation units due to grid reliability concerns in the face of a potential loss of Russian gas. Adding to the concerns of further declines in supply availability, the new incoming Colombian president is anti-fossil fuel, and though not guaranteed, could elect to ultimately end fossil fuel extractions in the country. Colombia currently exports about 50-60 million tons of thermal coal annually, which is already down considerably from roughly 90 million tons exported in 2016. Persistent coal supply tightness remains a major theme and is keeping the markets for our products strong.
On the back of this market strength, our sales team opportunistically secured additional sales contracts and increased our forward sold position by 7.6 million tons through 2025. We remain near fully contracted for 2022 and now have 19.6 million tons contracted for 2023. Let me hand the call over to Mitesh to provide an update on our financial performance in the quarter and some exciting developments for the company on the financial front.
Thank you, Jimmy, and good morning, everyone. Let me begin by updating you on our refinancing and other balance sheet initiatives before I dive into the quarterly results and outlook. Towards the end of 2Q and into early 3Q, we successfully renegotiated an amendment and extension of our revolving credit facility and our accounts receivable securitization facility. First, on the revolver front, I'm pleased to note that we are successful in securing $260 million of commitment to extend a tranche of our revolving credit facility with a maturity of July 2026.
We also have a non-extending tranche of the revolving credit facility of $140 million that will stay in effect through March 2023, which enables us to maintain a $400 million revolver throughout that period. The non-extending tranche of lenders made up $282 million of commitment in the previous version of our revolver, and they have chosen not to extend their commitments as ESG concerns continue to drive the lending decision for many of the banks. We thank the departing lenders for their past support of CONSOL Energy. On a positive note, we were able to identify several new banks that recognize the improving credit profile of our balance sheet, the critical role that coal continues to play around the world in providing reliable, low cost energy, and the important part that CONSOL's business plays in enabling America's energy independence.
Accordingly, we were successful in securing more than $100 million of commitments from these new lenders, many of whom are in the same communities that we currently serve. In addition to these new lenders, we secured roughly $40 million of upsized commitments from existing extending lenders. We welcome the new lenders to the CONSOL family, and we thank all the extending lenders for their continued support and commitment. In summary, while losing capacity is never easy, we are happy with our new revolving credit facility structure for several reasons. First, this amendment and extension right-sizes the facility to reflect the new CEIX, which now has the strongest balance sheet in its history and a lower need for external financing. Second, our current lender group consists of more supportive lenders, thus reducing the future risk of churn.
Third, we'll maintain full access to our current $400 million revolver through its current maturity at the end of March 2023, which allows us to rebuild liquidity while continuing to aggressively reduce debt and initiate a shareholder return program sooner. Finally, when the facility drops to $260 million in March 2023, we'll have the ability to add new lenders to the facility if we choose to do so. On the AR securitization front, we maintained the current $100 million capacity and extended the maturity to July 2025. Due to several favorable modifications to the borrowing base calculations, we have successfully achieved a higher facility utilization. Moving on to other balance sheet items. We have continued to take advantage of the opportunities presented by strong market fundamentals to further accelerate our financial goals and priorities.
In 2Q 2022, we generated $160 million of free cash flow. We continued to make strides on our overall debt reduction goal, deploying most of our free cash flow for that purpose. In 2Q 2022, we made total debt payments of $116 million, which included $75 million of Term Loan B payments and $35 million to fully retire our Term Loan A. We have now made total debt repayments of $154 million in the first half of 2022. I'm pleased to announce that we also made a $50 million discretionary payment on our Term Loan B at the end of July that is not reflected in our second quarter results. This brings our total debt repayments to more than $680 million since the beginning of 2018.
We will continue down the path of significant debt reduction towards achieving our goal of approximately $300 million of aggregate gross debt. Additionally, in the quarter, our unrestricted cash balance increased by nearly $40 million, despite our significant debt reductions, bringing our total unrestricted cash to $262 million at the end of June 2022. When accounting for our restricted cash of $51 million, our total cash balance sat at $313 million at quarter end. Furthermore, we ended 2Q 2022 with a liquidity position of $504 million. This all led to a net leverage ratio of just under 0.5x at the end of 2Q 2022, which was reduced from just under 1x at the end of 1Q 2022.
We remain excited by our progress on this front and expect to continue to better align our gross debt level with our mid-cycle EBITDA level. However, one area of disappointment for us has been the lack of recognition of our balance sheet and liquidity improvements in our credit ratings. Both S&P and Moody's continue to rate our corporate credit at essentially the same letter grade that it was lowered to during the depths of COVID. They each have recently experienced analyst turnover issues, which may be contributing to this inaction. While frustrating, we continue to work with them and emphasize the importance of our ratings for our borrowing costs. We are optimistic that with the recent debt reduction and revolver amendment, we can achieve some ratings improvement later this year. Finally, let me provide some color around the financial rationale behind our shareholder return program announced this morning.
We have prioritized a strong balance sheet since becoming a public company, but have really emphasized debt reduction over the last two-plus years during our shrinking access to capital markets. In fact, over just the last four quarters, we have reduced our gross debt by $190 million and enhanced our liquidity by $104 million. Furthermore, our strong free cash flow visibility and extension of our revolving credit facility gives us comfort in our ability to continue to reduce debt meaningfully, even while allocating some capital to our shareholder returns. In the near term, we'll continue to allocate the majority of our free cash flow towards debt reduction, and as we achieve our target debt level, we'll consider a further increase to our shareholder returns. Jimmy will provide more details on this program in his closing remarks.
Our financial strategy has evolved since early 2020 from a very defensive posture focused on liquidity preservation during the COVID-related demand decline to opportunistic debt repurchases and asset sales to a growth mode in 2021 with our restart of the Itmann project and the redevelopment of the fifth longwall at the Pennsylvania Mining Complex, ultimately culminating with this announced shareholder return program. Again, this all stems from our ability to generate free cash flow in all parts of the cycle, coupled with a prudent capital allocation strategy. Now let me recap our second quarter financial results and the outlook for the remainder of the year. This morning, we reported a very strong 2Q 2022 financial performance. We ended the quarter with net income of $126.3 million or $3.54 per diluted share and Adjusted EBITDA of $216.3 million.
Furthermore, we generated $159.9 million of free cash flow, primarily driven by $198.4 million of cash flow from operations and capital expenditures of $39.4 million. For the PAMC, we are pleased to announce that due to the strong 2Q 2022 performance and improved outlook, we are raising our expected average realized coal revenue guidance to a range of $64-$67 per ton, net of settlements of commodity derivatives. Our updated guidance assumes average PJM's day-ahead power forwards of $88.44 per MWh at the midpoint of the second half of 2022.
For every $1 per MWh change in PJM's power prices during the second half, we estimate the weighted average realization across our entire portfolio for the full year of 2022 will change by approximately $0.07 per ton at the midpoint price. Additionally, throughout this year, we have been successful in opportunistically blending and extending certain contracts to push out lower priced volumes into future years and replacing them with volumes that better match current market pricing, thereby creating a win-win situation for ourselves and our customers. This gives certain customers their desired volume commitments for multiple years while simultaneously improving our near-term pricing and balancing our sales book over a multiple year period by pushing lower priced tons to future years that are much less contracted.
Additionally, for the PAMC, we are improving our 2022 sales volume guidance range to 24-25 million tons as the operations ran very well in the first half of 2022, and the transportation bottlenecks have gradually improved since the end of 2021. However, on the flip side of those improvements, we are increasing our PAMC cash cost of coal sold guidance to a range of $32-$34 per ton. Ongoing inflationary pressures continue to create an upward push in the second quarter. While our operations and supply chain teams have done a great job of managing costs as best as possible, certain increases are out of our control. According to FactSet, analysts currently estimate the U.S. Producer Price Index for 2022 will increase by 11.6% compared to an expectation of 2.6% increase just one year ago.
Price increases for items such as steel, diesel, lubricants, power, and services have been a headwind so far this year. Despite this, we still expect an improvement to our cash margin of $3 per ton at the midpoint of our guidance ranges as compared to last quarter's guidance. Potentially offsetting some of the operating cost increases is a reduction to our capital expenditure guidance range to $160 million-$185 million. This is mainly driven by some delays in equipment deliveries and rebuilds that had been included in our initial guidance. For Itmann, our preparation plant project is now on track for 3Q 2022 startup, and we are reaffirming our production guidance of 300,000-500,000 tons for 2022.
We expect to provide additional operational guidance for the Itmann mine on our next call and in conjunction with the ramp up to full run rate production. We are very pleased with how 2022 has progressed to this point and our ability to optimize our sales book. Looking ahead, we remain even more excited about our future prospects. We continue to strengthen an already strong book of business for 2023 and beyond, and next year we expect higher sales volume from both the PAMC and Itmann that could further add to the upside. Additionally, we continue to bolster our balance sheet and lower the fixed cost of running the business through lower debt servicing cost. All these factors have put us in a good position to share the upside with our stakeholders.
With that, let me turn it back to Jimmy to touch on the shareholder return program and our key priorities for the rest of 2022.
Thank you, Mitesh. Now, let me touch on the details of our announced shareholder return program that we are very excited about. As Will promised for a few quarters, several conditions needed to be met before looking to shareholder returns. We wanted to get below 1x leverage, reduce a significant portion of our gross debt, and de-risk our Itmann development project. We are happy to report these conditions have now been met. We set just below 0.5x net leverage at the end of Q2 2022. Our Itmann project is nearing a ramp up to full production, and though we still have more work to do on our debt reduction targets, we feel comfortable about our ability to achieve our target gross debt level in the near term while still implementing a shareholder return program.
We have engaged many of our shareholders during the second quarter, and based on their feedback, we believe it is prudent to initially focus on dividends as the preferred means of shareholder return, with the flexibility to opportunistically repurchase shares of our common stock. Here's how the shareholder return program works. Under this program, at the discretion of the board of directors, CEIX will return a portion of its free cash flow generation back to shareholders in the form of quarterly dividends and/or share repurchases. Based on the free cash flow results from Q3 2022, the first payment under this new program will happen in the fourth quarter and return approximately 35% of free cash flow. In the short term, the majority of our remaining free cash flow will be allocated toward our debt reduction goals.
Once our target gross debt level is achieved, we expect to further increase the free cash flow allocation percentage. In order to kick off the program, we are also pleased to announce that the board of directors has elected to pay a special dividend of $1 per share on August 24th to all shareholders of record as of August 16th, based on our Q2 2022 results and excess free cash flow generation. We also announced this morning that in conjunction with the initiation of the shareholder return program, our board of directors has increased its previously authorized repurchase program to an aggregate amount of up to $600 million and extended the duration of the program by two years to December 31st, 2024. We now have $381 million of availability to repurchase our second lien notes and shares of CEIX common stock.
We appreciate the patience of our shareholders as we navigated through the significant debt burden associated with our spend, as well as a tough 2020 due to COVID-related demand destruction. However, we believed our capital allocation approach would set us up for success, and it is very rewarding to see it pan out now for our shareholders. Rest assured, we are not finished. We have more work to do on the debt reduction front, but we are well on our way. For the remainder of 2022, we have a few key focus areas to help drive success this year and beyond. First, we're focused on bringing the fifth longwall back into operation in late Q4 and are working with our operations, marketing, and logistic partners to ensure that we remain on track. We are also fully committed to getting our Itmann prep plant up and running this quarter.
Second, our sales team remains opportunistic in its approach and will continue to balance revenue visibility and contract duration with market optionality and arbitrage maximization. We expect to continue to layer in additional business for 2023 and beyond, and depending on the breadth of this ongoing demand strength, we expect to enter next year with a very strong contracted book of sales. This would allow us to turn our full attention to future years sooner than what is typical. Third, strengthening our balance sheet and liquidity is always a major focus. I'm very proud of our work to successfully amend and extend the revolver and AR securitization facility. We expect that this will increase our financial flexibility for years to come and, from a balance sheet perspective, allow us to focus on reducing our long-term gross debt level.
Our strong free cash flow generation and expectations for the near term should allow us to accelerate this goal. With that, I will hand the call back over to Nate.
Thank you, Jimmy. We will now move to the Q&A session of our call. At this time, I'd like to ask our operator to please provide the instructions to our callers.
Thank you. We'll now begin the question- and- answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Lucas Pipes from B. Riley Securities. Please go ahead.
Thank you, operator. Good morning, everyone, and congrats on the results and the announcement of the shareholder return program.
Thank you, Lucas. Good morning.
Morning. Few questions. I'll try to keep it short. On the contracted position for 2023, 19.6 million tons are fixed. Could you share what price those are fixed at?
Sure. Let me first give you the breakdown here, Lucas, of our volume for 2023. At 19.6, we have about 12.5 million tons contracted domestic. Of that 12.5 million, about 2.5 is linked to our power prices, and then 7.1 million tons export. Based on where API 2 forwards are today and also power prices, we're seeing our realization across the 19.6 come in and call it low-to-mid $70s. Also, you know, keep in mind, you know, we expect to have five longwalls in operation throughout next year.
You know, although we haven't announced guidance, I think it would be safe to assume that we will expect a year-over-year improvement in terms of our production sales volumes, which would give us, you know, let's just call it 6+ million tons of our production left to sell, which I will tell you we have the majority of that earmarked for the export markets.
That's very helpful. Quick follow-up. The export portion of the 19.6, is that floating with API 2, or is it at the cap in the average price you just mentioned? How should we think about the export piece?
Yeah. I would say,
Of the 19.6 .
Yeah, about 3.5 of the 7.1 are linked to API 2. I will tell you that we're significantly above where the cap is. I think Cal 2023 is trading roughly around $250-$260 today. That would have to drop significantly in order for us to get below what that cap is, and then the balance would be fixed price.
Understood. That's helpful. Thank you. Then you priced an incremental 3.3 million tons compared to the prior quarter. There are always a few moving pieces here, but why not more? Was that all incrementally domestic? If so, could you again please share kind of roughly the pricing ballpark on those incremental tons? Thank you.
Yeah. We did some optimization in 2022 as Mitesh mentioned. It was about 500,000 tons in 2022 that got moved out into future years. Majority of that did get moved out to 2023. That would have been domestic. When you take the domestic tons, optimization tons plus the incremental tons that we sold, I think when you do the back of the envelope calculation, the 3.3 incremental tons that we now have in 2023 were sold well north of $100, call it closer to $120.
Okay. That's domestic?
I'm sorry, domestic and export. It's more heavily weighted toward domestic, about 70% domestic, 30% export.
Okay. That's very helpful. Thank you very much for that. Now, I do wanna touch on one of the industry points that was raised, the 12 GW of coal-fired generation that has announced retirement delays. Do you have a rough regional breakdown for those extensions? How much of that would fall within the geographic footprint of CONSOL?
I don't have that specific breakdown, Lucas, but what I can tell you is what we're seeing is customers that were, I would say, concerned about long-term deals. What I mean by long-term deals is if their plants or units are gonna be running into the future, I think are now starting to get a sense that they will be needed. We're starting to see longer duration contracts because of that, and I would say higher volumes than they traditionally would contract out. I don't have the specific breakdown, but I can tell you the majority of our customers in the PJM and then also into the southeast are starting to get a sense as though coal will be a vital part of their energy mix, you know, for years and years to come.
That's helpful. I'll try to do one last one. You mentioned cancellation of a power supply agreement due to a bankruptcy of a supplier. What's the power situation on the cost side today? Are you floating with spot or have you locked in something else? What's the cost impact of that? Thank you. Thank you very much.
Lucas, right now we are more spot driven on the power side from a cost perspective. But our sensitivity to the cost piece is much lower than our sensitivity on the revenue piece. Higher power prices is a significant net benefit for us.
Got it. Okay. I appreciate it. I'll turn it over for now. Best of luck.
Thank you.
Thank you.
Okay. If you have a question, please press star then one. The next question comes from Michael Dudas from Vertical Research. Please go ahead.
Good morning, gentlemen.
Morning.
Morning.
Jimmy, characterize the mind of buyers of coal heading into the European or Asian markets today. Obviously, there's urgency given all the dynamics in the energy markets. Given other cycles that you guys have participated in, like maybe 2008 cycle, maybe the 2012-2013 cycle, is there gonna be more patience? Given where prices are, is there more willingness to be more variable on it? How are you guys thinking about it relatively, especially as you look out longer term to lock in significantly higher floor prices for your product than has been witnessed in the last, you know, 20 years?
Yeah. I'll take the first part of that, and then we'll let Bob, you know, talk about some of the specifics. Backing up, looking at the cycles, I think the one thing that we're seeing different here is the tightness in supply. You know, before, as soon as the market prices start to go up and, you know, reach attractable prices, you saw a lot of production increases. You're not seeing that today, although they may be a little. Some of that is because of, you know, we went through COVID. People were conserving cash. The investments are just not made, and the capital is not invested to bring on that supply.
I would say the one big difference, particularly, you know, in my career, and I've certainly been through all of those cycles, is there's not the supply response to drive that price back down as quickly. Now obviously there's things that, you know, we don't know looking into the future, such as this, you know, Russian-Ukraine war and those type things that play on the energy market in general. But I do believe that markets are gonna remain strong, you know, for at least the next couple of years. That's what we're looking at. When you look at where the coal is going into different regions, that also plays into what we do, whether we would hold back some or we would go ahead and move for those contracted positions. Obviously, we would sacrifice a little bit of price for duration. Yeah.
Then Mike, on the marketing side, just talking with our customers over in Europe, obviously there's a strong appetite to continue to contract forward. The challenge today, obviously in the near term, is that all the ports are nearly full with Russian coal today. You have the Rhine River situation, which is exacerbating the problem. You know, the utilities need the coal. Once this Rhine River situation kind of corrects, which we think will be sometime late August, early September, obviously the August tenth ban of Russian coal will take effect here. That obviously will reduce the amount of Russian or eliminate the Russian coal coming in.
Europeans will be looking at Colombia, U.S., to backfill a lot of that need. I think in Q4, you know, there's obviously gonna be a strong demand and desire to contract additional volumes. We have been successful in contracting volumes in 2023 to Europe. I will tell you that, the only reason why I don't think we have more done today, is just due to lack of liquidity, in the API2 markets, and then also the cost of hedging for these utilities. You know, mainly utilities in Europe do like to buy on a fixed price basis from, the producers. What they do is go out and they hedge, power prices, carbon prices, and API2.
with that being said, you know, I think there's still a lot of opportunity for us to move more coal into Europe, potentially as early as, you know, late Q4 of 2022, which kind of fits really well within our program as we have our fifth longwall coming online, and then 2023 as well and well beyond that.
Does your, you know, historical commitments to, say, the Indian market change on this part? How are they thinking about their needs and given where prices and availability is today?
Yeah. We're having calls with the Indians, you know, quite often. There certainly is strong demand there. Petcoke prices are off a little bit, so the biggest arb for us continues to be to ship coal into Europe. Ultimately, India is still a growth market, and we fully expect to continue to send coal to India for, you know, decades to come.
That's encouraging. Then turning to Itmann, Jimmy or Mitesh, maybe to remind us when you contemplated the investment into the project, what kind of longer-term price for the product did you budget in? Maybe tie that into cost inflation over the past several years, given what's happened and where the market is today. Are you willing to sell all that coal into the thermal market, which everybody seems to be the new game these days?
Well, I'll take the first part, and then we'll let Dan weigh in as well. We started, you know, thinking about the Itmann project. We started investing in it, I think it was somewhere around 2019. Obviously, you know, we had the COVID situation come on in 2020 to where we had to pull back on capital. Make no mistake about it, we're still very excited and feel good about this project. We did the sensitivities whenever, you know, we put Itmann in, understanding that at the time, you know, the met markets are somewhat volatile. I think we did a benchmark of around $150 when we put that in and did the net back to the coal mine, and we felt very good about the project at that number.
Obviously, the prices are elevated today, but we still feel like that Itmann is gonna be a very good project for us. As I said before, it's some of the best quality there, and we think it's gonna travel well and be well received from our customers. Dan, you have anything you wanna add?
No, I mean, I think you covered it pretty well, Jimmy. Michael, I guess you also were asking about the potential to send Itmann into the thermal market. I'd say we evaluate all of the options, but right now our priority with Itmann is taking a long-term view and really getting the brand established in the marketplace. As we ramp production up in the second half, we'll be looking to complete trials with a number of potential customers to get the coal established on the met side as our top priority. Obviously to the extent that we have additional tons to sell, having accomplished that, we will consider the best arbitrage opportunity.
Our terminal is a valuable asset for us in managing the logistics associated with all of that as well.
No, that makes perfect sense. Do you get the sense that we're gonna see some of these dynamics on the reverse crossovers as I can consider it, given where the markets are? Is that something that's tangible, or is it because of quality issues and logistics, it's a little bit more just around the edges, just generally in the market? Thanks, Bob.
Yeah. Yeah, I mean, I would tell you that, you know, high vol coals alone would have a better success rate in potentially crossing over into thermal markets. One thing if we were to take Itmann to the thermal markets, although I'd say it'd be a small percentage, we would likely use that and blend with our Bailey product to make a more superior product going forward. But Itmann by itself is not a coal that likely would be able to cross over by itself.
Yeah. The first priority for us, Mike, will be to get all the trials done to where we know the customers know the brand and we know what's there. We'll have a lot of decision points on where we take it.
Makes great sense, guy. Makes great sense, guys. Thanks a lot.
Thank you.
Thank you.
Thank you.
Thank you.
The next question comes from Nathan Martin from The Benchmark Company. Please go ahead.
Hey, good morning, guys. Congrats on the quarter, and thanks for taking my questions.
Thanks, Nate.
Good morning.
Thanks, Nate.
I think a lot of them have been addressed, but maybe, looking at the additional 7.6 million tons layered on through 25, can we get a breakdown of how those tons are spread across the next several years? Then maybe any early thoughts on how many total tons are committed, priced for 2024 at this point, and maybe with a split domestic/export for there? Thank you.
Sure, Nate, I'll take that. Of the 7.6, 5.5 were domestic, 2.1 were export for the total 7.6 million. The breakdown's a little foggy here because we do have the optimization tons on how they moved. I will just tell you that we had some incremental volumes, very small, that we sold in 2022. Obviously, we increased our sold position in 2023. Another 2.5 million in 2024, and then 1.4 million in 2025. In terms of 2024, we're not prepared to really give pricing guidance, but I can tell you, we have just over 7.2 million tons sold for 2024.
What I would tell you know, based on the amount of open tons we currently have and where the current forwards are, you know, I certainly could see a scenario by where we have our 2024 average sales price north of our 2023 average sales price.
That's extremely helpful, Bob. Appreciate that. Maybe kind of as we're looking at where API2 prices are today, obviously remain elevated as we talked about strong global demand for thermal coal. You know, could you walk us through, Bob, you know, kind of how you're calculating net backs as you see them right now?
Yeah, I think what I would tell you, Nate, is, you know, these markets, as you're well aware, are extremely volatile. I mean, we're seeing, you know, $20+ swings in API2 prices, you know, almost on a daily basis over the past couple months. But the good news is we have been able to lock in some volumes, you know, term volumes at attractive prices during these times. What I would suggest to you know, I think API 2 for Cal 2023 right now is right around $260. You know, based on what we've been seeing, the net back to the mine is in, call it, the mid to upper $100s.
Again, as I mentioned earlier, it's a little bit of a challenge to get volumes committed long-term today just based on the liquidity in the API2 markets as mentioned. I think that's a good kind of sensitivity, you know, looking at where prices are today, call it $260, you know, nets back mid to upper $100s.
Very helpful. Appreciate that. Then maybe, Bob, can you talk about, you know, how domestic contracting is going? I think, you know, you mentioned or Jimmy said, you know, obviously duration is an important factor for you guys. Again, with these elevated net backs, you know, hope that the power companies are seeing that out there as well. Have you guys had any success adding, you know, some tons with some duration on the domestic side?
Yeah, I mean, that's what's important for us. It gives us visibility. You know, most of our domestic contracts that we have concluded last quarter were anywhere from two to four years in duration. You know, I would just say this, you know, you've heard us say that we've shifted our focus to the export market and, you know, that still holds true today. That's where the growth is. Certainly wanna stress that our domestic customers, especially the ones that have been with us for decades, are extremely important to us and certainly would like, you know, we'll keep them in our portfolio, you know, for years to come.
Great. I appreciate the thoughts. Thanks for your time, and best of luck in the second half, guys.
Yep. Thanks, Nate.
Thank you.
There are no more questions in the queue. This concludes our question and answer session. I'd like to turn the conference back over to Nathan Tucker for any closing remarks.
Thanks, Jason. We appreciate everyone's time this morning, and thank you for your support in CEIX. We hope we answered your questions today, and we look forward to our next quarter early earnings call. Thanks, everyone.
Conference has now concluded. Thank you for attending today's presentation.