Oct 29, 2013 3 min read

CANONSBURG – Consol Energy Inc. Tuesday reported a third-quarter net loss of $64 million, or 28 cents per share, a result of lower coal prices from national and international markets.

The loss for the quarter ended Sept. 30 for the Southpointe-based coal and natural gas producer compared to an $11 million loss, or 5 cents per share for the year-earler quarter.

Pre-tax income for the third quarter was $11 million. After adjusting for five items, adjusted pre-tax income in the third quarter was $22 million.

Adjusted earnings before interest, taxes, depreciation and amortization, which is a non-GAAP financial measure, was $244 million for the most recent quarter compared to $210 million in the year-earlier quarter.

Consol’s gas division showed quarter-over-quarter margin expansion, nearly unchanged, while unit costs were lower, mostly because of higher volumes.

Overall natural gas production was up 17 percent, quarter-over-quarter, aided by the 72 percent growth in the Marcellus Shale component. All-in Marcellus unit costs decreased by 40 cents to $2.55 per million cubic feet.

The company said its gas division is on track to meet its 2014 production guidance of 210 billion cubic feet to 225 bcf.

For 2015 and 2016, Consol has announced annual production guidance increases of between 25 and 30 percent.

“Consol’s gas division continues to see the Marcellus Shale become a greater portion of the production mix,” commented Chief Executive Officer J. Brett Harvey. “This is important for two main reasons: the first is the lower-cost nature of the Marcellus resulting from drilling efficiencies such as pad drilling, and the second is sales price uplift associated with a higher concentration of liquids. Consol is not only on track to meet its 2014 overall gas production guidance but is also on track to more than double its Marcellus Shale production in 2014, compared to 2013.”

Coal and gas production results, which were announced on Oct. 15, exceeded previous guidance provided in the second quarter.

In the coal division, margins decreased primarily as a result of lower sale prices per ton, reflecting a decrease in the global metallurgical and thermal coal markets. Partially offsetting lower sales prices was approximately a 10 percent improvement in costs per ton.

The coal division costs per ton sold were $50.46 during the quarter, compared to $55.84 per ton from the year-earlier quarter. Per unit costs improved due to higher sales volumes and completed efficiency programs at the mines.

Consol said its liquidity remains strong at $2.3 billion, while it continues to invest in value-creating projects. Third quarter capital investments were $438 million, which is flat with the year-earlier quarter. BMX Mine remains on track to begin operations in April of 2014 with an expected total capital cost of $710 million. Cash flow from operations in the quarter was $196 million, as compared to $162 million in the year-earlier quarter. On Monday, Consol announced it was advancing its exploration and growth strategy, entering into an agreement to sell its Consolidation Coal Co. subsidiary for $3.5 billion to Murray Energy. CCC contains all five of Consol’s longwall coal mines in West Virginia.