https://www.miningweekly.com

Consol to create MLP for thermal coal assets

28th October 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

Font size: - +

TORONTO (miningweekly.com) – US-based coal and natural gas producer Consol Energy on Tuesday announced plans to create a master limited partnership (MLP) for its thermal coal assets by year-end.

The Pittsburgh-based company said in a telephone call with analysts that it hoped to announce an MLP by the end of the year, saying it was considering various structuring alternatives for all three of its business segments – the Utica/Marcellus shale assets, thermal coal and metallurgical coal.

Consol president and CEO Nicholas DeIuliis said it was the “right time” to spin out the assets to increase transparency, create new liquidity avenue optionality and preserve asset synergies it already controlled.

Consol executive VP and CFO David Khani provided more colour on the proposal, saying that, despite not yet having board approval to do so, the company was actively evaluating the creation of an MLP for its thermal coal assets, which included the Bailey mine, in Greene County, south-western Pennsylvania.

Earlier this year, Consol and joint venture 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.

THIRD-QUARTER MISS

For the third quarter ended September 30, Consol narrowed its loss to $1.6-million, or $0.01 a share, a significant improvement on the loss of $63.7-million, or $0.28 a share, a year earlier.

Consol reported adjusted net income of $20-million, or $0.09 a share, compared with a loss of $0.23 a share in the same quarter last year.

Revenue rose to $885-million in the quarter under review, up from revenues of $803-million in the prior comparative quarter.

The quarter’s performance undermined average Wall Street analyst expectations of adjusted earnings of $0.19 a share, derived from revenue of $889.06-million.

Consol had, in recent years, steadily been moving away from its reliance on coal to becoming a significant natural gas and oil producer. Coal made up about 68% of the company’s total free cash flow in 2013. This year, it was expected to shrink to 47% and by 2016, coal was expected to account for only 37% of the company’s earnings before interest, taxes, depreciation and amortisation.

In the third quarter, both natural gas and coal production beat Consol’s production guidance, despite soft prices for both commodities.

Consol's average margin per ton of low-volatility coal sold more than halved to $9.21 from a year earlier. The average margin per ton of thermal coal fell to $12.47 from $17.62. Coal output accounted for about 55% of the company's total revenue.

Sales of oil, natural gas and natural gas liquids rose 33.5% year-on-year to $257.4-million in the third quarter, boosted by higher output from the Marcellus and Utica shalefields.

Consol expected to achieve record output of up to 75-billion cubic feet of gas during the fourth quarter.

The company forecast natural gas output of 235-billion to 240-billion cubic feet equivalent for 2014 and further expected that total to grow by 30% in each of the next two years.

It also expected volumes and prices to improve marginally for its low-volatility coal this year but to remain unchanged in 2015. The thermal coal guidance remained unchanged.

As with other oil and gas companies operating in Appalachia, Consol said it had been fetching a lower price for its fuel compared with the third quarter of 2013, reporting an average sales price of $3.97 per thousand cubic feet equivalent.

Consol continued to run its Buchanan coal mine below capacity. The company reported that coal output at its Enlow Fork mine suffered from geologic setbacks and lower recovery rates, which was the largest impairment to its coal costs during the quarter.

As part of its strategy to become more liquid and to shed noncore assets, Consol revealed that it had sold some of its Illinois basin coal assets to an undisclosed buyer for $86-million, of which $75-million was paid upfront in cash.

Consol reported that it had cut retiree medical and pension benefits obligations from $4-billion a year ago, to $766-million in the period under review.

The company's NYSE-listed stock trended upwards on Tuesday, gaining 4.12% at $35.64 apiece in early afternoon trading.

Edited by Creamer Media Reporter

Comments

Showroom

Willard
Willard

Rooted in the hearts of South Africans, combining technology and a quest for perfection to bring you a battery of peerless standing. Willard...

VISIT SHOWROOM 
Stewarts & Lloyds
Stewarts & Lloyds

Stewarts & Lloyds today supplies steel and tube, pipe and fittings, valves, pumps, irrigation, fencing, profiling and roofing products. The cash...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Hyphen, Eva mine, ferrochrome price make headlines
Hyphen, Eva mine, ferrochrome price make headlines
27th March 2024
Resources Watch
Resources Watch
27th March 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.152 0.185s - 90pq - 2rq
Subscribe Now