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Released July 29, 2015 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Natural gas and coal producer CONSOL Energy Incorporated (NYSE:CNX) (Pittsburgh, Pennsylvania) lowered its planned exploration and production (E&P) capital expenditures (capex) for 2015 and 2016 to meet its cash flow goals. Industrial Info is tracking four CONSOL Energy projects worth $345 million.
CONSOL now forecasts 2015 E&P capex at $800 million, compared with its January forecast of $1 billion for the year, executives said during the company's earnings conference call. E&P capex for 2016 will run from $400 million to $500 million. Total company capex, including maintenance on the coal mine operations, will total about $600 million in 2016, CONSOL executives said.
The company incurred a $603 million net loss for second-quarter 2015, compared with a net loss of $25 million in the second quarter of 2014. CONSOL has natural gas and natural gas liquids (NGLs) operations in the Marcellus and Utica shale regions, as well as coal mines in Pennsylvania, Virginia and Kentucky. The company has shifted much of its growth focus from coal to natural gas, with the goal of eventually moving its coal operations into a separate corporate entity.
The largest CONSOL project tracked by Industrial Info is the $250 million Bailey coal mine refuse areas expansion project in Pennsylvania. Currently in the advanced planning stage, the three-phase project involves expansion of the coal refuse area, which serves both the 12 million-ton-per-year Bailey mine and the Enlow Fork mine. The project includes the development of 23.2 acres of wetland and 1.6 acres of open water. Construction kickoff is set for August this year, with completion in third-quarter 2016.
Chief Executive Officer Nicholas Deluliis said the capex guidance was lowered as a result of improved natural gas well profiles, decreased cycle times, and the debottlenecking of midstream infrastructure.
"The continuous improvement we have seen over the past 18 months has been substantiated," Deluliis said. "These improvements allow us to achieve our production growth targets over the next 18 months at much lower capital levels, which result in the company being able to generate free cash flow beginning in the second half of 2015."
The gains in positive free cash flow will give the company more options in the current natural gas market, he said.
Company executives said the net loss includes an $829 million impairment charge on CONSOL's shallow oil and natural gas assets, largely the result of depressed energy prices.
Total revenue and other income for the quarter amounted to $649 million, down 30% from $937 million in the same quarter of 2014. Natural gas, NGLs and oil sales totaled $202 million, down from nearly $230 million a year earlier. Coal sales totaled $415 million, down from $536 million in the second quarter of 2014.
The E&P Division achieved production of 75.5 billion cubic feet equivalent in the second quarter. CONSOL maintained its annual gas production guidance at 30% growth for 2015 and 20% for 2016.
The company's Coal Division produced 7.5 million tons in the second quarter. Its Buchanan mine in Virginia saw metallurgical coal prices drop due to weaker markets.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, 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.
CONSOL now forecasts 2015 E&P capex at $800 million, compared with its January forecast of $1 billion for the year, executives said during the company's earnings conference call. E&P capex for 2016 will run from $400 million to $500 million. Total company capex, including maintenance on the coal mine operations, will total about $600 million in 2016, CONSOL executives said.
The company incurred a $603 million net loss for second-quarter 2015, compared with a net loss of $25 million in the second quarter of 2014. CONSOL has natural gas and natural gas liquids (NGLs) operations in the Marcellus and Utica shale regions, as well as coal mines in Pennsylvania, Virginia and Kentucky. The company has shifted much of its growth focus from coal to natural gas, with the goal of eventually moving its coal operations into a separate corporate entity.
The largest CONSOL project tracked by Industrial Info is the $250 million Bailey coal mine refuse areas expansion project in Pennsylvania. Currently in the advanced planning stage, the three-phase project involves expansion of the coal refuse area, which serves both the 12 million-ton-per-year Bailey mine and the Enlow Fork mine. The project includes the development of 23.2 acres of wetland and 1.6 acres of open water. Construction kickoff is set for August this year, with completion in third-quarter 2016.
Chief Executive Officer Nicholas Deluliis said the capex guidance was lowered as a result of improved natural gas well profiles, decreased cycle times, and the debottlenecking of midstream infrastructure.
"The continuous improvement we have seen over the past 18 months has been substantiated," Deluliis said. "These improvements allow us to achieve our production growth targets over the next 18 months at much lower capital levels, which result in the company being able to generate free cash flow beginning in the second half of 2015."
The gains in positive free cash flow will give the company more options in the current natural gas market, he said.
Company executives said the net loss includes an $829 million impairment charge on CONSOL's shallow oil and natural gas assets, largely the result of depressed energy prices.
Total revenue and other income for the quarter amounted to $649 million, down 30% from $937 million in the same quarter of 2014. Natural gas, NGLs and oil sales totaled $202 million, down from nearly $230 million a year earlier. Coal sales totaled $415 million, down from $536 million in the second quarter of 2014.
The E&P Division achieved production of 75.5 billion cubic feet equivalent in the second quarter. CONSOL maintained its annual gas production guidance at 30% growth for 2015 and 20% for 2016.
The company's Coal Division produced 7.5 million tons in the second quarter. Its Buchanan mine in Virginia saw metallurgical coal prices drop due to weaker markets.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, 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.
