EX-99.1 2 dex991.htm SLIDE PRESENTATION SLIDE PRESENTATION
1
Bear Stearns Global
Credit Conference
May 17, 2006
Katharine W. Kenny
Vice President, Investor Relations
Eric B. Tolbert
Vice President & Chief Financial Officer
Exhibit 99.1

2
FORWARD-LOOKING STATEMENTS: Certain statements in this presentation are forward-looking as
defined
by
the
Private
Securities
Litigation
Reform
Act
of
1995.
Due
to
known
and
unknown
risks,
the
Company’s actual results may differ materially from its expectations or projections. Factors potentially
contributing
to
such
differences
are
described
in
further
detail
at
the
conclusion
of
this
presentation
and
in
the Company’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.
Safe Harbor Statement

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Coal is the Fuel of Choice

4
World Coal Demand Accelerating
SOURCE:  BP Statistical Review of World Energy 2005
World Energy Demand Growth from 2001 to 2004
25%
9%
6%
4%
0%
5%
10%
15%
20%
25%
30%
Coal
Natural Gas
Oil
Nuclear
Growth in Btu Consumption

5
World Energy Demand
SOURCE:  U.S. Energy Information Administration
Rest of World
China
U.S.
%
Change
2020E
1990
+59%
375
237
+262%
98
27
+48%
125
85
Annual Energy Consumption (Quadrillion Btu)
The modernization of the world’s most populous
country imposes huge burdens on an increasingly tight
global energy supply

6
U.S. Energy Demand
The U.S. is increasingly competing for expensive and
uncertain foreign supplies to power our cars, homes
and factories
Transportation
Residential*
Industrial*
* Electricity consumption allocated to primary fuels based on U.S. utility average consumption
SOURCE:  U.S. Energy Information Administration, 2004 data
Oil
97%
Other
3%
Oil
9%
Gas
33%
Coal
36%
Other
22%
Other
15%
Coal
24%
Gas
31%
Oil
30%

7
U.S. Coal -
The Underutilized Energy Supply
SOURCE:  BP Statistical Review of World Energy 2005
(2004 reserves and production)
11 years
10 years
245 years
0
50
100
150
200
250
U.S.
China
World
Oil
Gas
Coal

8
U.S. Growth in Coal Demand
SOURCE: CSFB
•
High prices of alternative energy sources
•
91 gigawatts
of new coal-fired power plants in the U.S.
have been proposed or are under development
»
If only 50% actually are built, they would require
approximately 135 million additional tons of coal annually

9
Technology Driving Demand –
Gasification/Liquefaction
•
Coal
gasification
enables
economic
and
environmentally
responsible
coal
power
generation
»
Competitive with natural gas at $4.40/mmBtu
»
Natural Gas prices averaged $7.89/mmBtu in 2005
•
Coal
liquefaction
provides
a
near-term
solution
to
oil
crisis
»
Competitive with conventional diesel at oil prices above
$35/barrel using existing technology
SOURCE: Lehman, Rentech, Inc., U.S. Energy Information Administration

10
Delivering Shareholder Value
in Central Appalachia

11
Massey Production Growth
Massey has delivered long-term growth, via organic
expansion and opportunistic acquisitions
(million tons)
0
10
20
30
40
50
1990
1992
1994
1996
1998
2000
2002
2004
2006E

12
Other Central Appalachian Production Declines
SOURCE: Energy Ventures Analysis, Inc.
Central Appalachia competitors have had difficulty
maintaining margins and growth
(million tons)
150
175
200
225
250
275
300
1990
1992
1994
1996
1998
2000
2002
2004
2006E

13
Leading Regional Reserve Position
* 2005 Company reserves as % of estimated total 30 year forward regional production
SOURCE: Energy Ventures Analysis, Inc., Company reports
Reserve share in Primary Region*
62%
40%
12%
11%
18%
0%
10%
20%
30%
40%
50%
60%
70%
CONSOL
Massey
Peabody
Magnum
Arch
Primary Region             NAPP                 CAPP                 PRB                    CAPP                    PRB

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Geographically Advantaged
•
In 2005, Massey’s steam
coal customers were
focused in the
Southeastern and Mid-
Atlantic states
•
Central Appalachia enjoys
tremendous transportation
advantages in these
markets, especially versus
PRB low sulfur coals

15
Powder River Basin Challenges
•
Greater exposure to rising freight rates and delivery
interruptions
•
Rail infrastructure capacity out of basin is constrained
•
Rail system interchange bottlenecks
•
Most advantaged markets have already switched
•
Utility switching costs to reconfigure boilers is high
•
Higher inventory requirements and shipment time delays

16
Challenges Facing Imports
SOURCE: Energy Ventures Analysis, Inc.
•
Port infrastructure constrained
•
Source risk –
not dependable for long-term secure
supplies
•
Weaker US dollar increases cost
•
Imports remain a small fraction of overall U.S. coal
consumption (2.7% in 2005)

17
Growing Revenue per Ton
2001 –
2006E Revenue per ton
$36.02
$30.79
$31.30
$27.51
$42.02
$50.00
$55.50
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
2001*
2002
2003
2004
2005
2006E
Estimated Market Value
Revenue / Produced Ton
* 2001 is for fiscal year ended October 31, 2001

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Proven Ability to Maintain Margin
SOURCE: Company reports
30.85
31.44
33.74
36.52
36.33
37.57
42.07
41.88
41.75
42.39
46.90
30.14
30.74
40.69
37.20
33.95
34.73
31.76
30.99
30.20
29.14
28.66
28.56
26.97
28.66
36.90
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
Q1
2003
Q2
2003
Q3
2003
Q4
2003
Q1
2004
Q2
2004
Q3
2004
Q4
2004
Q1
2005
Q2
2005
Q3
2005
Q4
2005
Q1
2006
Produced Coal Revenue/Ton
Average Cash Cost/Ton

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Grow Surface Mine Capacity
19%
35%
49%
41%
0%
10%
20%
30%
40%
50%
60%
1996
2003
2004
2005
Surface Tons as % of Total Production

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Massey Energy:  Strengths and
Challenges

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Capital Discipline
•
Opportunistic Central Appalachia consolidator
»
Focus on asset purchases with minimal legacy liabilities
»
Synergistic targets with clear strategic value
•
Up to $270 million in capital investments projected for 2006
•
Capital restructuring in late 2005
»
Reduced fully diluted share count by 7.5%
»
Balanced a cash tender with an equity tender for two series of
convertible debt
»
Extended maturity profile
•
Measured share buyback program
»
To be funded out of excess free cash flow and cash on hand

22
Low Legacy Liabilities
2005 Legacy Liabilities as a Percentage of Net Worth*
* Net worth defined as shareholders equity less intangibles
SOURCE:  Company reports
326
226
97
60
46
29
28
155
0
50
100
150
200
250
300
350
CONSOL
Foundation
James
River
Peabody
Alpha
Massey
ICG
Arch

23
Labor Challenge
•
Generation of miners lost during 1980s and
1990s
•
Experienced labor key to past productivity
•
Skilled labor critical to underground mining
productivity
•
Strong demand in current coal marketplace
results in fierce competition for labor

24
Wage and Benefit Enhancements
•
Measured wage increases
•
Increased productivity and retention bonuses
•
Enhanced medical program benefits
•
Supplemental benefit programs to encourage
longevity, such as auto and homeowners
insurance
•
New medical facility established in 2005

25
Comprehensive Training and Orientation
•
Extensive training and member
development
•
Orientation and safety programs
•
Mentor program

26
Massey –
Creating Long-term Value
•
Foremost producer in Central Appalachia with
increasing market share
•
Leading Central Appalachian reserve base enables long-
term organic growth
•
Capital discipline to optimize leverage and liquidity
requirements
•
Safety, community and environmental stewardship
programs that improve ‘Our Total Environment’

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Financial Statistics

28
Recent Results
$130
$42.07
11.3
10.6
$448
1
st
Qtr. 2005
$81
$426 *
EBITDA
$46.90
$42.02
Average per ton
realization
10.5
43.1
Tons produced
10.1
42.3
Produced tons
sold
$476
$1,778
Produced coal
revenue
1
st
Qtr. 2006
Full Year
2005
*Excluding charges of $212 related to the Company’s debt repurchase and exchange offers
(in millions, except per ton amounts)

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Outstanding Debt Securities
As of March 31, 2006
B1/BB-
$ 760.0
6.785% senior notes due 2013
0.8
9.6
335.0
B2/B
4.75% convertible senior notes due 2023
B1/BB-
2.25% convertible senior notes due 2024
B1/BB-
6.625% senior notes due 2010
In millions
Ratings

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Capitalization
($ in millions -
except %)
48.0%
48.9%
Total net debt-to-book capitalization ratio
59.8%
59.6%
Total debt-to-book capitalization ratio
$    
688.9
$   
721.8
Total net debt
105.0
105.0
Less: Restricted cash
319.4
282.0
Less: Cash
$ 
1,860.5
$ 
1,861.8
Total capitalization
747.2
753.0
Shareholder’s equity
$
1,113.3
$ 
1,108.8
Total debt
Pro forma
12/31/05*
3/31/06
*Presentation
of
December
31,
2005
amounts
pro
forma
for
the
reduction
to
shareholders’
equity
on January 1, 2006, for the cumulative effect of an accounting change required by EITF 04-6 in the
after-tax amount of $93.8 million

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Disclaimer
FORWARD-LOOKING STATEMENTS: Certain statements in this presentation are forward-looking as defined by the Private Securities Litigation Reform
Act of 1995.  Such forward-looking statements are based on facts and conditions as they exist at the time such statements are made as well as predictions as
to
future
facts
and
conditions
the
accurate
prediction
of
which
may
be
difficult
and
involve
the
assessment
of
events
beyond
the
Company’s
control.
Caution
must be exercised in relying on forward-looking statements. Due to known and unknown risks, the Company’s actual results may differ materially from its
expectations
or
projections.
Factors
potentially
contributing
to
such
differences
include,
among
others:
market
demand
for
coal,
electricity
and
steel
which
could adversely affect the Company’s operating results and cash flows; future economic or capital market conditions; deregulation of the electric utility
industry; competition in coal markets; inherent risks of coal mining beyond the Company’s control, including weather and geologic conditions; the
Company’s ability to expand mining capacity; the Company’s production capabilities; the Company’s plan and objectives for future operations and
expansion or consolidation; failure to receive anticipated new contracts; customer cancellations of, or breaches to, existing contracts; customer delays or
defaults in making payments; the Company’s ability to manage production costs; the Company’s ability to timely obtain necessary supplies and equipment;
the Company’s ability to attract, train and retain a skilled workforce; fluctuations in the demand for, price and availability of, coal due to labor and
transportation costs and disruptions, governmental policies and regulatory actions, legal and administrative proceedings, settlements, investigations and
claims, foreign currency changes and other factors; and greater than expected environmental and safety regulation, costs and liabilities. The forward-
looking statements are also based on various operating assumptions regarding, among other things, overhead costs and employment levels that may not be
realized. While most risks affect only future costs or revenues anticipated by the Company, some risks might relate to accruals that have already been
reflected
in
earnings.
The
Company’s
failure
to
receive
payments
of
accrued
amounts
could
result
in
a
charge
against
future
earnings.
Information
concerning those factors is available in the Company’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.
NON-GAAP INFORMATION: Included in this presentation are EBITDA results, which is defined as income before interest and taxes, depreciation,
depletion and amortization. Although EBITDA is not a measure of performance calculated in accordance with generally accepted accounting principles,
management
believes
that
it
is
useful
to
an
investor
in
evaluating
the
Company
because
it
is
widely
used
in
the
coal
industry
as
a
measure
to
evaluate a
company’s operating performance before debt expense and as a measure of its cash flow. EBITDA does not purport to represent operating income, net
income or cash generated by operating activities and should not be considered in isolation or as a substitute for measures of performance in accordance with
generally accepted accounting principles. In addition, because EBITDA is not calculated identically by all companies, the presentation here may not be
comparable to other similarly titled measures of other companies. Reconciliations of adjusted EBITDA can be found in the Company’s earnings press
release for the relevant periods.

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