CONSOL Energy Reports Second Quarter Results; Asset Monetization Processes Continue; Coal Costs Per Ton Remain Below Earlier Guidance
PITTSBURGH, July 25, 2013 /PRNewswire/ -- Consol Energy Inc. (NYSE: CNX), the leading diversified fuel producer in the Eastern United States, reported a net loss for the quarter ended June 30, 2013 of $13 million, or a loss of $0.05 per diluted share, compared to net income of $153 million, or $0.67 per diluted share from the year-earlier quarter. The prior year's second quarter included gains due to several asset sales.
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The company lost an adjusted $0.03 per diluted share1 in the just-ended quarter, which is a non-GAAP measure, after adjusting for items not generally included in security analysts' estimates. The two major discrete items in this quarter were largely offsetting: a pre-tax loss of $23.3 million for additional expenses associated with the Blacksville Mine fire, and a $24.7 million pre-tax gain on the sale of assets. A complete list of these items appears in the EBITDA reconciliation table further in the release.
Adjusted EBITDA, which is also a non-GAAP financial measure, was $218 million for the quarter ended June 30, 2013, compared to $295 million in the year-earlier quarter.
Coal and gas production results, which were announced ten days ago, were generally in line with previous guidance. Lower prices and sales volumes for thermal coal was the primary driver for lower adjusted earnings in the quarter, as compared to the year-earlier quarter. Lower prices for the company's premium low-vol coal, due to weaker worldwide demand, also contributed to weaker adjusted earnings. Details are shown in a table later in the release.
CONSOL Energy's Coal Division continued to hold the line on costs. Across all tons, costs per ton sold were $51.87 in the 2013 second quarter. This was a modest decrease of $0.17 per ton from the prior-year's second quarter. The progress was achieved despite lower sales volumes in the just-ended quarter. In the continuation of a process to manage costs, the company has initiated a thorough review of staffing levels and project expenditures.
"The second quarter was challenging," commented J. Brett Harvey, chairman and chief executive officer, "as we incurred the expense associated with the Blacksville mine fire and were not able to realize revenue from the mine's planned sales. In addition, during the second quarter we exerted discipline in a weak Asian market environment, which resulted in overall lower sales volumes and shipments for the rest of the coal segment."
"Looking to the third quarter and remainder of 2013, we see an improving and stronger level of demand for our domestic thermal portfolio. The improving picture for thermal coal demand is a cumulative result of the Blacksville outage, outages and idlings at competitor mines, the hot summer weather, higher year-over-year gas prices, and announced retirements of less-efficient coal plants outside of our market portfolio that will result in the base-load coal plants that we supply running harder. All of these factors bode well for second half 2013 thermal demand in our core region," continued Mr.Harvey.
In the Gas Division, results were aided by slightly higher production and higher prices, when compared to the year-earlier quarter. The growth in 2013 gas production is on track, as the company's well completions accelerate through the remainder of the year.
For 2013, CONSOL Energy has stepped up its asset sale process to include coal and gas transportation infrastructure, in order to capitalize on the current market environment and to re-invest proceeds in higher return projects. As previously announced, a process is in place to evaluate and potentially monetize several assets this year as long as fair value is received for those assets. Investment bankers have been engaged, data rooms have been established, and in two cases, the process is proceeding to a second round of bidding.
Furthermore, we are evaluating our overall corporate structure to consider different alternatives to unlock additional value for shareholders.
Ten days ago, the company announced 2014 expected gas production of 210 – 225 Bcfe. Assuming the company achieves the mid-point of its 2013 gas production of 172.5 Bcfe, the 2014 range represents an increase of between 22 and 30 percent.
CONSOL Energy's liquidity remains strong at $2.2 billion, while the company continues to invest in value-creating projects. Second quarter capital investments were $352 million. Capital investment costs for the BMX Mine are now expected to total $710 million. The increase from the prior estimate is due, in part, to a lower sales price for development tons, which increases the dollars being capitalized during the development phase.
Cash flow from operations in the quarter was $125 million, as compared to $138 million in the year-earlier quarter.
1The terms "Adjusted EPS" and "Adjusted EBITDA" are non-GAAP financial measures, which are defined and reconciled to the GAAP EPS and GAAP net income below, under the caption "Non-GAAP Financial Measures."
Coal Division Results:
| COAL DIVISION RESULTS BY PRODUCT CATEGORY - Quarter-To-Quarter Comparison | ||||||||||||||||||||||||||||||||||||
| Low-Vol | Low-Vol | High-Vol | High-Vol | Thermal | Thermal | |||||||||||||||||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | Quarter | |||||||||||||||||||||||||||||||
| Ended | Ended | Ended | Ended | Ended | Ended | |||||||||||||||||||||||||||||||
| June 30, | June 30, | June 30, | June 30, | June 30, | June 30, | |||||||||||||||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||||||||
| Beginning Inventory (millions of tons) | 0.1 | 0.2 | — | — | 0.9 | 2.0 | ||||||||||||||||||||||||||||||
| Coal Production (millions of tons) | 1.2 | 1.1 | 0.9 | 1.2 | 11.7 | 12.2 | ||||||||||||||||||||||||||||||
| Ending Inventory (millions of tons) | 0.1 | 0.3 | — | — | 0.8 | 2.0 | ||||||||||||||||||||||||||||||
| Sales - Company Produced (millions of tons) | 1.1 | 1.0 | 0.9 | 1.2 | 11.8 | 12.1 | ||||||||||||||||||||||||||||||
| Sales Per Ton | $ | 97.54 | $ | 123.71 | $ | 62.50 | $ | 59.94 | $ | 59.39 | $ | 61.47 | ||||||||||||||||||||||||
| Beginning Inventory Cost Per Ton | $ | 85.60 | $ | 72.97 | $ | — | $ | — | $ | 50.57 | $ | 55.60 | ||||||||||||||||||||||||
| Total Direct Costs Per Ton | $ | 44.31 | $ | 48.66 | $ | 29.13 | $ | 27.88 | $ | 31.60 | $ | 30.97 | ||||||||||||||||||||||||
| Royalty/Production Taxes Per Ton | 5.97 | 8.10 | 2.88 | 3.01 | 4.26 | 4.18 | ||||||||||||||||||||||||||||||
| Direct Services to Operations Per Ton | 4.90 | 4.50 | 4.53 | 4.85 | 5.17 | 5.42 | ||||||||||||||||||||||||||||||
| Retirement and Disability Per Ton | 5.56 | 7.00 | 2.86 | 2.74 | 3.68 | 3.62 | ||||||||||||||||||||||||||||||
| DD&A Per Ton | 7.90 | 9.51 | 5.61 | 6.46 | 6.20 | 6.35 | ||||||||||||||||||||||||||||||
| Total Production Costs | $ | 68.64 | $ | 77.77 | $ | 45.01 | $ | 44.94 | $ | 50.91 | $ | 50.54 | ||||||||||||||||||||||||
| Ending Inventory Cost Per Ton | $ | (64.76) | $ | (69.84) | $ | — | $ | — | $ | (55.36) | $ | (56.03) | ||||||||||||||||||||||||
| Total Cost Per Ton Sold | $ | 70.46 | $ | 79.80 | $ | 45.01 | $ | 44.94 | $ | 50.60 | $ | 50.50 | ||||||||||||||||||||||||
| Average Margin Per Ton Sold | $ | 27.08 | $ | 43.91 | $ | 17.49 | $ | 15.00 | $ | 8.79 | $ | 10.97 | ||||||||||||||||||||||||
| Addback: DD&A Per Ton | $ | 7.90 | $ | 9.51 | $ | 5.61 | $ | 6.46 | $ | 6.20 | $ | 6.35 | ||||||||||||||||||||||||
| Average Margin Per Ton, before DD&A | $ | 34.98 | $ | 53.42 | $ | 23.10 | $ | 21.46 | $ | 14.99 | $ | 17.32 | ||||||||||||||||||||||||
| Cash Flow before Cap. Ex and DD&A ($MM) | $ | 38 | $ | 53 | $ | 21 | $ | 26 | $ | 177 | $ | 210 | ||||||||||||||||||||||||
Contact
Investor: Dan Zajdel at (724) 485-4169, or Tyler Lewis at (724) 485-3157; or Media: Lynn Seay at (724) 485-4065
