CONSOL Energy’s first quarter coal production exceeds guidance

CONSOL Energy’s (NYSE: CNX) Coal Division produced 14.8 million tons for the first quarter of 2013, including 1.3 million tons of low-vol coking coal from the company’s Buchanan longwall mine in southwest Virginia.

Both figures exceeded guidance as production surged to meet stronger-than-expected export markets. Despite Buchanan’s strong first quarter production, realized prices weakened as the quarter progressed, CONSOL added in an April 12 statement.

During the first quarter of 2013, CONSOL’s total coal inventory decreased by 414,000 tons to 964,000 tons as of March 31. This is the lowest total coal inventory levels in 15 years. Thermal coal inventory decreased to 875,000 tons during the quarter. Low-vol Buchanan and Amonate inventory also decreased during the quarter by 153,000 tons, to only 89,000 tons. Amonate is a mining operation based around the Amonate prep plant in McDowell County, W.Va. Many coal producers have been battling high inventories in the recent slack coal market.

“Our coal sales exceeded guidance in the first quarter for two reasons: First, domestic generators took all contracted volumes as they responded to cold weather,” said J. Brett Harvey, chairman and CEO. “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 5-6 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.” 

CONSOL’s Gas Division produced 39.2 Bcfe for the 2013 first quarter or 4% more than the 37.7 Bcfe produced in the 2012 first quarter. Consistent with previous quarter’s guidance, first quarter 2013 production was down 6% compared to the fourth quarter of 2012, as a result of frac schedules and other seasonal factors that limited wells turned into line.

No time given for Blacksville No. 2 restart

First quarter earnings will be affected by a Blacksville No. 2 mine fire pre-tax expense impact of $15.2m. On March 12, smoke was detected exiting the Orndoff shaft at the Blacksville No. 2 longwall mine, working the Pittsburgh coal seam in Greene County, Pa. All day shift underground employees were safely evacuated and none sustained injuries. The location of the fire was identified and containment and extinguishment procedures were developed. The fire has since been extinguished as of March 24. It is unknown when mine operations will resume, CONSOL said. Blacksville No. 2 produces approximately 400,000 tons of coal per month under normal operating conditions. The pre-tax expense impact reflects the expenses incurred to extinguish the fire. Insurance recovery is uncertain at this time and the impact of any potential recovery has not been reflected in the first quarter results.

CONSOL Energy expects second quarter 2013 total coal production to be 13.25 million–13.75 million tons. Annual 2013 total coal production guidance is 55.5 million–57.5 million tons. Buchanan’s second quarter production is expected to be between 0.9 million–1.0 million tons, while annual production guidance is now estimated at 4.0 million–4.2 million tons.

CONSOL expects its 2013 gas production to be approximately 170–180 Bcfe (net to CONSOL). Second quarter 2013 gas production, net to CONSOL, is expected to be 38–40 Bcfe, or relatively flat compared with the 39.2 Bcfe produced in the first quarter of 2013. Based on the drilling and completion schedule, CONSOL’s expects production to be more back-end weighted for this year.     

CONSOL’s Coal Division completed seven longwall moves in the first quarter of 2013 without a safety exception. In the area of compliance, CONSOL said it saw violations decrease by over 5% compared to the year-earlier quarter.

The Bailey Preparation Plant in southwest Pennsylvania, which processes coal for the adjacent Bailey and Enlow Fork longwall mines, has successfully finished and put into service the plant 1A upgrade, which will serve the BMX Mine, which is essentially a fifth longwall for this complex. It is the last of the five plant modules to be upgraded; and with the process improvements, the Bailey Plant can now efficiently process 8,200 tons per hour (tph) of plant feed, compared to 6,300 tph previously. The only work that still needs to be completed on the project is the construction of the new 155-foot diameter refuse thickener and the remodeling of the plant operator control room.

In addition, the Shoemaker longwall job in the Pittsburgh seam in northern West Virginia has completed the 1 South project, which is located on the western end of the mine. The project upgraded nine seals to 120 psi. Seals are used to close off unused parts of the mine from the working sections, which is a safety move to prevent migration of methane and any underground explosions.

CONSOL Energy will report additional operational and financial results for the first quarter on April 25.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.