TORONTO (miningweekly.com) – The NYSE-listed stock of US coal and gas producer Consol Energy rose 3% in after-market trading on Wednesday, following the company’s announcement that it had formed a master limited partnership (MLP) for its thermal coal business.

The Pittsburgh-based company said the MLP's purpose would be to own interests in certain of Consol’s thermal coal properties and related mining operations located in Pennsylvania, including its Bailey, Enlow Fork and Harvey mines and the related preparation plant.

Consol said it expected to start an initial public offering (IPO) of the MLP in mid-2015. After closing the MLP IPO, Consol would own the general partner of the MLP, any incentive distribution rights and a majority of the limited partner interests of the MLP.

Consol also reported that it would spin out its metallurgical coal assets into a separate subsidiary with a view to conducting an IPO of up to 20% of the subsidiary's equity in the second half of next year.

The subsidiary's assets would include Consol’s Buchanan mine and related preparation plant in Virginia, and its interest in its Western Allegheny Energy joint venture (JV).

Consol president and CEO Nicholas DeIuliis in October said, when the MLP was first mooted, it was the “right time” to spin out the assets to bring forward the value of its thermal and metallurgical coal assets, increase transparency, create new liquidity avenue optionality and preserve asset synergies it already controlled.

"We will retain control [of the coal assets] so that we can continue to offer our customers the same reliability that they have come to expect from Consol, as well as the continued unique ability to supply those customers with both coal and gas as their needs demand and the market dictates,” DeIuliis said on Wednesday.

Consol would designate separate management teams to run each of these businesses to most effectively maintain operational focus.

After closing these transactions, Consol would consist of its core oil and gas exploration and production business, its interest in CONE Midstream Partners LP, a controlling interest in its cash-flow generating thermal coal MLP and a controlling interest in its metallurgical coal subsidiary.

Earlier this year, Consol and JV partner Noble Energy took public their gas-gathering MLP – Cone Midstream Partners – and, in the process, raised $440-million, which the company reported was the model it would probably emulate with its proposed thermal coal MLP.

In the US, an MLP is allowed only if it derives most of its cash flows from real estate, natural resources or commodities.

Meanwhile, Consol said it would embark on a two-year, $250-million share buy-back programme. The company said that should it proceed with the thermal MLP IPO, it would reduce or eliminate its current regular dividend effective in the first quarter after the IPO. It believed that the programme would be a more efficient method to return capital to shareholders than a dividend and that yield-oriented investors had ample other investment options through the company's Cone Midstream Partners LP and, if completed, the proposed thermal coal MLP and/or its metallurgical coal subsidiary.

"The culmination of the structural moves completed in 2014 and anticipated for 2015 are intended to improve Consol’s valuation by providing straightforward, sum-of-the-parts analytics and reducing the risk to the E&P [exploration and production] growth plan, which we continue to target at 30% year-on-year growth in 2015 and 2016,” DeIuliis said.

The company’s stock gained more than a dollar on Wednesday evening to trade at $36.01 apiece.