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Researched by Industrial Info Resources (Sugar Land, Texas)--In the fourth quarter of 2012, CONSOL Energy Incorporated (NYSE:CNX) (Pittsburgh, Pennsylvania) worked to rebound from a weak third quarter. William Lyons, chief financial officer, principle accounting officer and executive vice president, said the company experienced higher gains because of improvements in the coal segment. However, the changes in the U.S. coal industry have negatively impacted the company's financial performance to some degree.
Although CONSOL Energy's finances improved in some areas from the third quarter to the fourth, the company also experienced some losses compared to 2011's financial results; in the fourth quarter of 2011, the company had a net income of $196 million, and in the fourth quarter of 2012, it had $150 million. In the last quarter of 2013, total revenue stood at $1.24 billion. In the same period in 2011, total revenue was $1.37 billion, which was a record high for the company. Overall, the company did not shine year-over-year.
Lyons said that total revenue dropped because of coal prices, which were down $5.11 per ton in 2012. This caused the company to drop $75 million. Coal sales volumes, which also were down significantly, had a negative impact on CONSOL's revenue.
"CONSOL's active coal division generated earnings before interest and taxes, or EBIT, of $266 million, which is a decrease of $19 million from the year-earlier quarter," Lyons said. He also mentioned that coal capital expenditure is projected to decrease to "a range of $410 million to $520 million in 2013, after it was $920 million in 2012." It is widely known that demand for coal has been dropping partly because of low natural gas prices. Many utilities are turning to natural gas, instead of coal, to generate electricity.
It is clear that the declines in the coal market had a ripple effect on CONSOL's business, so the company is not placing as many bets on the coal segment any more. In fact, Lyons said that after the completion of the Bailey Mine Expansion (BMX), which will be CONSOL's lowest-cost coal operation, the company does not expect to invest in any new major coal road projects. (The BMX Mine is projected to be completed in the first half of 2014.) J. Brett Harvey, chairman and chief executive officer, stated that CONSOL's "inventories on coal, especially stream coal, in the U.S. are the lowest level they've been in five years."
CONSOL may be slowly exiting some of its coal business, but the company is investing is wells associated with gas activity. Lyons said that the company plans to invest between $835 million and $935 million in these types of wells in 2013. "We estimated that this level of investment will result in 2013 production of somewhat between 170 to 180 bcf [billion cubic feet] of gas equivalent," Lyons said.
Although CONSOL's had rocky year-over-year results, the company still managed to generate $728 million in cash flow from operations. Lyons explained that CONSOL achieved exceptional fourth-quarter results because the company took measures to control costs.
Industrial Info is tracking 16 projects that are worth a total of $965 million for which CONSOL Energy is the plant owner. All of these projects are either located in Pennsylvania or West Virginia. One of the more pricey projects, which has a total investment value of $200 million, is in West Finley, Pennsylvania. For this project, CONSOL is performing construction activities for Bailey Coal Preparation Plant's expansion. This project began in the second quarter of 2012 and is projected to be completed in the first quarter of 2013.
Another project in which CONSOL is involved, which is almost as expensive as the Bailey expansion, is in Wadestown, West Virginia. For this project, CONSOL is performing permitting for the grassroot Mason Dixon Thermal Longwall Underground Mine. This project began in January 2013 and is expected to be completed in 2016.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Although CONSOL Energy's finances improved in some areas from the third quarter to the fourth, the company also experienced some losses compared to 2011's financial results; in the fourth quarter of 2011, the company had a net income of $196 million, and in the fourth quarter of 2012, it had $150 million. In the last quarter of 2013, total revenue stood at $1.24 billion. In the same period in 2011, total revenue was $1.37 billion, which was a record high for the company. Overall, the company did not shine year-over-year.
Lyons said that total revenue dropped because of coal prices, which were down $5.11 per ton in 2012. This caused the company to drop $75 million. Coal sales volumes, which also were down significantly, had a negative impact on CONSOL's revenue.
"CONSOL's active coal division generated earnings before interest and taxes, or EBIT, of $266 million, which is a decrease of $19 million from the year-earlier quarter," Lyons said. He also mentioned that coal capital expenditure is projected to decrease to "a range of $410 million to $520 million in 2013, after it was $920 million in 2012." It is widely known that demand for coal has been dropping partly because of low natural gas prices. Many utilities are turning to natural gas, instead of coal, to generate electricity.
It is clear that the declines in the coal market had a ripple effect on CONSOL's business, so the company is not placing as many bets on the coal segment any more. In fact, Lyons said that after the completion of the Bailey Mine Expansion (BMX), which will be CONSOL's lowest-cost coal operation, the company does not expect to invest in any new major coal road projects. (The BMX Mine is projected to be completed in the first half of 2014.) J. Brett Harvey, chairman and chief executive officer, stated that CONSOL's "inventories on coal, especially stream coal, in the U.S. are the lowest level they've been in five years."
CONSOL may be slowly exiting some of its coal business, but the company is investing is wells associated with gas activity. Lyons said that the company plans to invest between $835 million and $935 million in these types of wells in 2013. "We estimated that this level of investment will result in 2013 production of somewhat between 170 to 180 bcf [billion cubic feet] of gas equivalent," Lyons said.
Although CONSOL's had rocky year-over-year results, the company still managed to generate $728 million in cash flow from operations. Lyons explained that CONSOL achieved exceptional fourth-quarter results because the company took measures to control costs.
Industrial Info is tracking 16 projects that are worth a total of $965 million for which CONSOL Energy is the plant owner. All of these projects are either located in Pennsylvania or West Virginia. One of the more pricey projects, which has a total investment value of $200 million, is in West Finley, Pennsylvania. For this project, CONSOL is performing construction activities for Bailey Coal Preparation Plant's expansion. This project began in the second quarter of 2012 and is projected to be completed in the first quarter of 2013.
Another project in which CONSOL is involved, which is almost as expensive as the Bailey expansion, is in Wadestown, West Virginia. For this project, CONSOL is performing permitting for the grassroot Mason Dixon Thermal Longwall Underground Mine. This project began in January 2013 and is expected to be completed in 2016.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
