Diversified fuel producer, Consol Energy Inc, (CNX) gave an insight into its operational results for the second quarter of 2012. Consol’s Gas Division recorded production growth of roughly 10% to 37.3 billion cubic feet (Bcf) from 34.0 Bcf produced in the year-ago period. The coal division produced 14.6 million tons during the quarter, which includes 1.1 million tons of low volatile metallurgical coal. The company, which functions primarily in Eastern United States made significant progress in safety measures across its various business units.
The success of Console Energy’s safety program can be attributed to the adoption of safety measures and compliance to safety rules at the company’s Enlow Fork Mine and Buchanan Mine units, which produced 2.6 million tons and 1.1 million tons of coal, respectively. Additionally, the company’s other mines functioned without any unexpected disruptions. In terms of compliance across the company’s coal division, violations of safety regulations were down 18% from the previous quarter. Consol Energy’s overall coal inventory surged sequentially by 0.2 million tons to 2.4 million tons at the end of second quarter.
In its central Pennsylvania unit, the company completed the drilling of its Gaut 4 pad in Westmoreland County at the end of the second quarter. The company also witnessed record production of 17.9 million cubic feet (MMcf) per day of natural gas from its Marcellus Shale well. In the Southwest unit, the company drilled a total of 10 wells and initiated operations at 8 wells in the first quarter. Currently, drilling operations are in swing in two rigs. In northern West Virginia, the company drilled two wells on the Phillippi 4 pad in Barbour County. During the quarter, the company drilled a total of 17 Marcellus Shale wells, while using 18 wells for production.
Consol Energy’s closest competitor Noble Energy Inc. (NBL) is also strengthening its position in the Marcellus region and has drilled 6 wells on its SHL-6 pad. The first sales are expected at the end of this month.
The company persistently engages in joint venture deals to maintain its growth momentum. Consol Energy’s agreement with Hess Corporation (HES) enabled the development and completion of its first horizontal well, the TUSC 3A in the western portion of Tuscarawas County, Ohio.
Consol Energy’s operational achievements in the quarter reaffirm the strength of its security strategies, which enabled the company to address compliance issues, eliminate unnecessary expenses and increase production. Also, effective safety procedures will provide positive assurances to the company’s employees and augment productivity.
For the third quarter, the company expects coal production to be around 14-14.5 million tons, which includes 1.1 million tons from the Buchanan Mine. The guidance assumes that some of its mines will remain partly operational during the third quarter. In the gas division, the company anticipates production for third quarter and full year 2012 to be 40-42 Bcf and 157 – 159 Bcf, respectively.
Based in Canonsburg Pennsylvania, Consol Energy is a multi-fuel energy producer as well as energy services provider, primarily catering to the U.S. power producers. The company principally operates two business lines: Coal and Natural Gas. Consol Energy presently holds a Zacks#3 Rank, which translates to short-term Hold rating.
CONSOL ENERGY (CNX): Free Stock Analysis Report
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