Met Coal Production Was 0.6 Million Tons; Thermal Coal Production Was 12.9 Million TonsCNX Gas Production Guidance Raised Again, This Time to 92 Bcf
Oct. 22, 2009 (PR Newswire) --
PITTSBURGH, Oct. 22 /PRNewswire-FirstCall/ -- CONSOL Energy Inc. (NYSE: CNX), a producer of high-Btu thermal coal, metallurgical coal, and natural gas, reported net income attributable to CONSOL Energy shareholders for the quarter ended September 30, 2009 of $87.4 million, or $0.48 per dilutive share. This is nearly equal to the net income attributable to CONSOL Energy shareholders of $90.1 million, or $0.49 per dilutive share, for the quarter ended September 30, 2008.
"We executed the third quarter according to plan," said J. Brett Harvey, president and chief executive officer. "In fact, stronger than expected metallurgical coal markets enabled us to produce more met coal than we expected. Our thermal coal sales, though, have still not shown a meaningful rebound. Our strategy is to match production with customer shipments so as not to build inventory. We continue to invest in our mines and our gas fields to create shareholder value.
"At CNX Gas," Mr. Harvey continued, "we've raised production guidance again, this time from 89 Bcf to 92 Bcf. Results from our Marcellus Shale and coalbed methane programs continue to exceed expectations. Based on our Marcellus results, CNX Gas has increased its capital for lease and land acquisition.
"We've changed our presentation with this release," Mr. Harvey concluded. "We are now reporting separate results for met coal and thermal coal. We believe that this increased transparency will enable investors to more clearly see the earning power, product diversity, and growth potential of CONSOL Energy. This increased transparency should enable investors to more accurately value the company relative to its peers."
FINANCIAL RESULTS - Period-To-Period Comparison
Nine Nine
Quarter Quarter Months Months
Ended Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
Total Revenue
and Other Income $1,094.5 $1,173.1 $3,383.8 $3,409.7
Net Income attributable to
CONSOL Energy shareholders $87.4 $90.1 $396.5 $266.1
Earnings Per Share - diluted $0.48 $0.49 $2.17 $1.44
Net Cash
from Operating Activities $162.0 $213.3 $728.2 $683.2
EBITDA $239.8 $235.9 $910.9 $715.1
EBIT $129.8 $139.6 $587.2 $430.3
Capital Expenditures $192.7 $303.7 $689.1 $740.0
Cash (Provided by) Used in
Other Investing Activities* ($23.9) ($1.7) ($74.2) ($18.2)
In millions of dollars except per share. Amounts for capital expenditures do not include amounts for equity affiliates.
*Represents net cash (provided by) used in investment in Equity Affiliates and Proceeds from Sales of Assets.
Quarter-To-Quarter Discussion of Financial Results
Total Revenue and Other Income was $1,094.5 million for the quarter ended September 30, 2009, compared with $1,173.1 million for the quarter ended September 30, 2008, or a decrease of 7%. Although revenue from our thermal coal business was higher, met coal revenue and gas revenue were lower.
Net income attributable to CONSOL Energy shareholders and earnings per share were $87.4 million, or $0.48 per dilutive share. This compares with $90.1 million, or $0.49 per dilutive share in the year-earlier quarter. The slight decrease was due to lower thermal coal production, lower met coal production, and lower gas prices during the third quarter.
CONSOL Energy had net cash from operating activities of $162.0 million for the quarter ended September 30, 2009, with $65.4 million attributable to CNX Gas. For CONSOL Energy, this compares to $213.3 million for the quarter ended September 30, 2008, with $120.1 million attributable to CNX Gas.
CONSOL Energy had total capital expenditures of $192.7 million in the quarter ended September 30, 2009, with $49.3 million attributable to CNX Gas. For both CONSOL Energy and CNX Gas, quarterly capital expenditures in the September 2009 quarter are lower than the June 2009 quarter, as some projects move toward completion.
Liquidity
As of September 30, 2009, CONSOL Energy had $336.9 million of short-term debt and $426.7 million in total liquidity, which is comprised of $31.4 million of cash and $395.3 million available to be borrowed under its $1.0 billion bank facility. As of September 30, 2009, CNX Gas Corporation had $73.1 million of short-term debt and $113.0 million in total liquidity, which is comprised of $1.0 million of cash and $112.0 million available to be borrowed under its $200.0 million bank facility.
Met Coal Operations
MET COAL OPERATIONS- Period-To-Period Comparison
Nine Nine
Quarter Quarter Months Months
Ended Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
----- ----- ---- ----
Total Coal Sales (millions of
tons) 0.7 0.8 1.3 2.0
----------------------------- --- --- --- ---
Sales - Company Produced
(millions of tons) 0.7 0.8 1.3 2.0
----------------- --- --- --- ---
Coal Production (millions of tons) 0.6 0.9 1.2 2.2
---------------------------------- --- --- --- ---
Average Realized Price Per Ton -
Company Produced $97.07 $117.82 $101.12 $113.73
---------------- ------ ------- ------- -------
Operating Costs Per Ton $44.50 $47.98 $66.49 $53.58
----------------------- ------ ------ ------ ------
Non-Operating Charges Per Ton $10.87 $9.08 $16.33 $9.61
----------------------------- ------ ----- ------ -----
DD&A Per Ton $4.88 $4.47 $7.72 $4.44
------------ ----- ----- ----- -----
Total Cost Per Ton - Company
Produced $60.25 $61.53 $90.54 $67.63
---------------------------- ------ ------ ------ ------
Operating Margins Per Ton $52.57 $69.84 $34.63 $60.15
------------------------- ------ ------ ------ ------
Financial Margins Per Ton $36.82 $56.29 $10.58 $46.10
------------------------- ------ ------ ------ ------
Operating costs include items such as labor, supplies, power, preparation costs, project expenditures, subsidence costs, gas well plugging costs, charges for employee benefits (including Combined Fund premiums), royalties, as well as production and property taxes. Non-operating charges include items such as charges for long-term liabilities, direct administration, selling and general administration. Operating Margins Per Ton are defined as Average Realized Price Per Ton less Operating Costs Per Ton. Financial Margins Per Ton are defined as Average Realized Price Per Ton less Total Costs Per Ton - Company Produced.
Metallurgical Coal Operations consist almost entirely of the company's Buchanan Mine in southwestern Virginia. This mine, which produces some of the highest quality low-vol met coal in the world, resumed longwall production in early June with two shifts. A third shift was added during the third quarter, as shipments to steel producers increased. For the quarter just-ended, 0.6 million tons were produced, versus 0.9 million tons in the year-earlier quarter.
The average realized price per met ton was $97.07 per ton in the just-ended quarter, down from $117.82 in the year-earlier quarter.
Total cost per ton was $60.25 per met ton, down from $61.53 per ton. The company believes costs at Buchanan are among the lowest of any met mine in the country.
Operating and financial margins per ton were both down, as lower realized prices weakened considerably from the year-earlier quarter.
Met coal inventory as of September 30, 2009 was 0.5 million tons.
Thermal Coal Operations
THERMAL COAL OPERATIONS- Period-To-Period Comparison
Nine Nine
Quarter Quarter Months Months
Ended Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
---- ---- ---- ----
Total Coal Sales (millions of
tons) 13.0 14.5 41.2 46.8
----------------------------- ---- ---- ---- ----
Sales - Company Produced
(millions of tons) 13.0 14.1 41.0 45.6
----------------- ---- ---- ---- ----
Coal Production (millions of tons) 12.9 13.9 42.7 45.5
---------------------------------- ---- ---- ---- ----
Average Realized Price Per Ton -
Company Produced $58.07 $46.75 $57.38 $44.50
---------------- ------ ------ ------ ------
Operating Costs Per Ton $36.70 $34.72 $33.73 $30.83
----------------------- ------ ------ ------ ------
Non-Operating Charges Per Ton $6.28 $6.06 $5.66 $5.40
----------------------------- ----- ----- ----- -----
DD&A Per Ton $4.85 $4.58 $4.47 $4.18
------------ ----- ----- ----- -----
Total Cost Per Ton - Company
Produced $47.83 $45.36 $43.86 $40.41
---------------------------- ------ ------ ------ ------
Operating Margins Per Ton $21.37 $12.03 $23.65 $13.67
------------------------- ------ ------ ------ ------
Financial Margins Per Ton $10.24 $1.39 $13.52 $4.09
------------------------- ------ ----- ------ -----
Sales and production include CONSOL Energy's portion from equity affiliates and consolidated variable interest entities. Operating costs include items such as labor, supplies, power, preparation costs, project expenditures, subsidence costs, gas well plugging costs, charges for employee benefits (including Combined Fund premiums), royalties, as well as production and property taxes. Non-operating charges include items such as charges for long-term liabilities, direct administration, selling and general administration. Operating Margins Per Ton are defined as Average Realized Price Per Ton less Operating Costs Per Ton. Financial Margins Per Ton are defined as Average Realized Price Per Ton less Total Costs Per Ton - Company Produced.
Thermal Coal Operations consist of the company's mines in Northern Appalachia, its non-met Central Appalachian mines, and its Western mine. For the just-ended quarter, 12.9 million tons were produced, versus 13.9 million tons in the year-earlier quarter. Production was reduced to match lower shipments resulting from lower economic activity and milder summer weather. All of the company's 9 longwalls that produce thermal coal were running by September 1, after a period of summer shutdowns.
Regional thermal coal production was 10.9 million tons in Northern Appalachia, 1.7 million tons in Central Appalachia, and 0.3 million in the West in the just-ended quarter.
The average realized price per ton for our thermal operations was $58.07 per ton, up 24% from $46.75 in the year-earlier quarter.
Total cost per ton was $47.83 per ton, up 5% from $45.36 per ton in the year-earlier quarter. Higher costs per ton were primarily due to production being down 7%, quarter over quarter.
Operating and financial margins per ton were both up significantly, as much higher realized prices were only slightly offset by higher unit costs.
Thermal coal inventory as of September 30, 2009 was 2.8 million tons.
"Since the fourth quarter of last year," noted J. Brett Harvey, "CONSOL Energy has been able to capture higher pricing for its thermal sales because of the continued build-out of scrubbers by generators in our natural market area. CONSOL's thermal coal now commands a premium in the marketplace because of its high Btu content. I believe that investors need to consider this new pricing paradigm when valuing CONSOL."
Gas Operations
CNX Gas Corporation (NYSE: CXG), 83.3% of which is owned by CONSOL Energy, reported total net income attributable to CNX Gas shareholders of $35.5 million for the quarter ended September 30, 2009, compared with $67.4 million in the year earlier quarter. CNX Gas Corporation also issued its earnings release this morning. Additional information regarding CNX Gas Corporation financial and operating results for the quarter is available in its release and can be found in the investor section of its website: http://www.cnxgas.com
Guidance
CONSOL Energy expects to invest $1.0 billion in its coal and gas businesses during calendar year 2009. The company continues to monitor and evaluate capital spending to ensure adequate liquidity and to preserve options for possible external investment. The company is committed to completing capital projects already in progress, including those that increase capacity and efficiency. CNX Gas expects to invest largely from cash flow generated from operating activities for 2009.
GUIDANCE
2009 2010 2011
---- ---- ----
COAL-COMMITTED TONS W/O PRICING (MM) - 7.2 19.5
COAL-TONS WITH FIRM PRICING
Tons Committed and Priced
(MM tons, 10/16/09) 58.2 51.1* 20.8
Avg. Realized Price/Ton
Committed & Priced $58.74 $53.51 $51.53
COAL-TONS PRICED WITH COLLARS
Tons (MM) - 0.4 6.0
Average Ceiling - $58.25 $62.08
Average Floor - $43.25 $52.80
Notes: *2010 Tons Committed and Priced include 1.4 MM tons of met coal at a price of $114.47 per ton.
Tons priced with ceilings and floors are not included in tons with firm pricing; they are additive.
