CONSOL Energy (NYSE: CNX) and its recently-created partial subsidiary, CNX Coal Resources LP (NYSE: CNXC), on Jan. 6 offered updates, including reductions in expected 2016 coal sales.
CONSOL Energy’s 2016 Coal Division budget continues to reflect maintenance of production capital. Total Coal Division capital expenditures of $170 million-$190 million include the following: $140 million-$155 million allocated to production and $30 million-$35 million for other activities related to land, water, safety, and the Baltimore Terminal. CONSOL Energy’s 2016 Coal Division capital and production guidance reflects 100% of the Pennsylvania Complex (“PA Operations”), consistent with the consolidation accounting methodology applied for the 20% of the PA Operations owned by CNX Coal Resources.
In response to ongoing coal market uncertainty, CONSOL’s total Coal Division is reducing 2016 expected sales to 27.0 million-32.0 million tons, compared to previous guidance of 30.6 million-33.4 million tons. The reduction reflects further coal market weakness due to unusually warm winter weather and low natural gas prices impacting customer’s coal burn.
CONSOL said it is working with customers to help with their inventory levels by adjusting delivery schedules in order to improve operational consistency. These adjustments to delivery schedules intensified towards the end of December 2015 and negatively impacted the timing of coal shipments. As a result, and due to the current visibility for the first quarter of 2016, the company believes that it is prudent to lower the total coal sales guidance for 2016.
Pennsylvania Operations, consisting of the Bailey, Enlow Fork and Harvery longwall mines in the Pittsburgh coal seam, has a 2016 sold position of 24.1 million tons. However, the average realizations may change from the previously provided estimates depending on the customer mix, timing of shipments, and other factors. Although the timing of shipments creates quarter to quarter volatility, CONSOL expects that the committed tons will get shipped. In conjunction, CONSOL continues to seek opportunities for additional incremental sales to offset any potential delays from contracted customers.
CONSOL Energy will report financial results for the quarter ended Dec. 31, 2015 at 6:45 a.m. ET on Jan. 29. CONSOL Energy is a Pittsburgh-based producer of natural gas and coal.
CNX Coal Resources announced Jan. 6 that in response to the ongoing uncertainty in coal markets, it is reducing its expectations for 2016 coal sales to 4.4 million-5.2 million tons compared to previous expectations of 5.0 million-5.4 million tons. That is basically its share of the Bailey/Enlow Fork/Harvey mine complex.
CNX Coal Resources has a 2016 sold position of 4.8 million tons. However, given the ongoing uncertainty in the coal markets the actual average realization may change from previously provided estimates depending on the customer mix, timing of shipments and other factors. Our 2016 maintenance capital expenditure is currently expected to be in the $24.5 million-$27.5 million range.
Jimmy Brock, Chief Executive Officer of CNX Coal Resources GP LLC, commented, “These are extremely difficult times and one of the most challenging coal markets I have seen in my long tenure in the industry. We are working with our customers on delivery schedules and making the operational decisions we believe are necessary in this environment. Although the timing of shipments creates quarter to quarter volatility, we expect the committed tons will be shipped. In the meantime, our marketing team continues to seek opportunities for additional incremental sales to offset any delays from our contracted customers.”
CNX Coal Resources will issue its fourth quarter earnings release after the market close on Jan. 28. It is a growth-oriented master limited partnership formed by CONSOL Energy to manage and further develop all of CONSOL’s active thermal coal operations in Pennsylvania. Its initial assets include a 20% undivided interest in, and operational control over, CONSOL’s Pennsylvania mining complex, which consists of three underground mines and related infrastructure.