Consol 1Q coal exports drive sales above guidance

April 12, 2013

CANONSBURG – Consol Energy Inc.’s coal sales took advantage of a colder first quarter as the coal and natural gas producer noted its inventories fell to a 15-year low in the first quarter.

The Southpointe-based producer of coal and natural gas also said Friday its coal exports helped to drive total coal sales above guidance.

The company’s gas division also reported a 4 percent increase in natural gas production over the first-quarter output of 2012.

The figures were given as part of Consol’s operations update for the quarter ended March 31.

Consol said in a news release its coal division produced 14.8 million tons for the first quarter of 2013, including 1.3 million tons of low-vol coking coal from its Buchanan Mine.

Both figures exceeded guidance as production surged to meet stronger-than-expected export markets. Despite Buchanan’s strong first quarter production, the company said realized prices weakened as the quarter progressed.

During the first quarter, Consol’s total coal inventory decreased by 414 thousand tons to 964 thousand tons as of March 31. This is the lowest total coal inventory levels in 15 years.

Thermal coal inventory decreased to 875 thousand tons during the quarter. Low-vol Buchanan and Amonate inventory also decreased during the quarter by 153 thousand tons, to only 89 thousand tons.

Consol Chief Executive Officer J. Brett Harvey said coal sales were helped by both increased domestic and overseas demand for its thermal coal.

“First, domestic generators took all contracted volumes as they responded to cold weather,” Harvey said. “This was the reverse of what happened in the 2012 first quarter, when record warm temperatures caused domestic generators to push back or defer some 5 to 6 million tons.

“Additionally, the 2013 first quarter sales were helped by stronger-than-expected export markets. Consol’s mines were able to respond effectively and efficiently to meet these incremental sales.”

The company’s gas division produced 39.2 billion cubic feet for the 2013 first quarter or 4 percent more than the 37.7 Bcfe produced in the 2012 first quarter.

Consistent with the previous quarter’s guidance, first quarter 2013 production was down 6 percent compared to the fourth quarter of 2012, as a result of frac schedules and other seasonal factors that limited wells turned into line. During the quarter, the gas division set a Baker Hughes U.S. land record by using its AutoTrak Curve Rotary Steerable tool to drill a Marcellus Shale lateral at 10,684 feet on the Kuhns 3B well in central Pennsylvania.

During the quarter, a CNX Gas shareholders litigation settlement produced a pre-tax expense adjustment of $20.2 million. The adjustment is the result of an agreement in principle for resolution of the class actions brought by shareholders of CNX Gas challenging the tender offer by Consol Energy to acquire all the shares of CNX Gas common stock that it did not already own for $38.25 per share in May 2010. The total settlement provides for a payment to the plaintiffs of $42.73 million, of which the company expects to pay $20.2 million. This settlement is subject to court approval.

The company also said a arch 12 fire at its Blacksville No. 2 Mine in Greene County was responsible for a pre-tax expense impact of $15.2 million. It is unknown when mine operations will resume.

For the second quarter, Consol said it expects total coal production to be between 13.25 million and 13.75 million tons. Annual 2013 total coal production guidance is between 55.5 million and 57.5 million tons. Buchanan Mine’s second quarter production is expected to be between 0.9 million and 1 million tons, while annual production guidance is now estimated at between 4 million and 4.2 million tons.

The company said it expects its 2013 gas production to be between 170 Bcfe and 180 Bcfe, with second quarter output estimated between 38 Bcfe and 40 Bcfe, or relatively flat compared with the 39.2 Bcfe produced in the first quarter of 2013.



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