CONSOL reports earnings; to sell Miller Creek and Fola ops in West Virginia

Coal and gas producer CONSOL Energy (NYSE: CNX) on July 26 reported net cash provided by operating activities in the just-ended quarter of $95 million, compared to $66 million in the year-earlier quarter, which includes $12 million and $24 million of net cash provided by discontinued operating activities, respectively.

CONSOL said it has entered into deals to sell its Miller Creek Mining Complex and Fola Mining Complex in Central Appalachia. The Miller Creek Complex, located in West Virginia, has an active surface mining operation, which produced 2.1 million tons in 2015, and two underground mines, which are idle. Fola Mining is a closed surface mining operation in West Virginia. The Miller Creek and Fola Mining Complexes each have 114 million tons of owned and leased coal reserves, and they have a total of $103 million of mine closing and reclamation liabilities on CONSOL’s Consolidated Balance Sheets.

In the transaction, the buyer will acquire the Miller Creek and Fola assets and will assume the Miller Creek and Fola mine closing and reclamation liabilities; in order to equalize the value exchange, CONSOL will pay the buyer $27 million cash at the closing, of which a portion will be held in escrow for purposes of obtaining the surety bonds required for the permits to transfer, and an additional $17 million in installments over the next four years. These payments will result in an additional loss of $44 million that CONSOL expects to record during the third quarter of 2016. The transaction is expected to close in the third quarter.

CONSOL Energy’s mainstay Pennsylvania Operations, consisting of three longwall mines in the Pittsburgh coal seam, sold 6.2 million tons in the 2016 second quarter, compared to 5.7 million tons during the year-earlier quarter. 

During the second quarter of 2016, the Pennsylvania Operations total unit costs were $34.46 per ton, compared to $44.15 per ton in the year-earlier quarter.

As reported by affiliate CNX Coal Resources LP (NYSE: CNXC) in its second quarter 2016 earnings press release, dated July 25: “From an operational standpoint, the second quarter came in ahead of our expectations primarily due to higher shipments. Our operational team delivered those tons despite four longwall moves, difficult mining conditions at the Enlow Fork Mine, and difficult longwall recovery conditions during one of the Bailey longwall moves. The Harvey Mine, which was idled in January 2016, was brought back online during the second quarter to meet customer demands, while the Bailey and Enlow Fork mines were undergoing longwall moves. Based on our current outlook for shipment volumes, we expect to run all five longwalls for the rest of 2016. Productivity for the second quarter, as measured by tons per employee-hour, improved by 17% compared to the year-ago period, despite the higher number of longwall moves negatively impacting production. For the third quarter, CNXC expects coal shipments and average realized price per ton to increase slightly, and cost of coal sold per ton to decrease compared to the second quarter.”

During the second quarter, CONSOL’s active coal operations generated $78 million of cash from continuing operations before capital expenditures.

CONSOL Energy expects annual 2016 Pennsylvania Operations sales to be approximately 22.5 million-25.5 million tons.

CONSOL Energy expects 2016 total Coal Division capital expenditures to be between $105 million-$125 million, which includes Pennsylvania Operations capital expenditures of $90 million-$100 million On a normalized basis, the Coal Division expects maintenance of production capital of $5-$6 per ton.

CONSOL Energy is a Pittsburgh-based energy producer, and one of the largest independent natural gas exploration, development and production companies, with operations centered in the major shale formations of the Appalachian basin.

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.