Diversified fuel producer CONSOL Energy Inc. (CNX) reported a loss of 3 cents per share for the second quarter of 2013, widely missing the Zacks Consensus Estimate of earnings of 18 cents.
GAAP loss at the company was 5 cents versus earnings of 67 cents in the prior-year quarter. The difference between GAAP and operating losses in the reported quarter was due to a one-time adjustment of 2 cents.
Revenue
CONSOL Energy’s quarterly revenue decreased 16.4% to $1.21 billion from $1.45 billion in the year-ago quarter. The top line marginally missed the Zacks Consensus Estimate of $1.22 billion.
Segment Performance
Coal Division
In the quarter, the company produced 13.8 million tons of coal, of which 1.2 million tons were low-volatile metallurgical coal, 0.9 million tons were high-volatility and 11.7 million tons were thermal coal. Out of the total thermal coal production, 11.2 million tons came from Northern Appalachia while 0.5 million tons were from Central Appalachia.
Like the prior quarter the company registered a decline in coal inventory. CONSOL Energy’s total coal inventory in the second quarter decreased 4.9% year over year to 917,000 tons.
Thermal coal inventory decreased by 102,000 tons to 773,000 tons during the quarter, as customers continued to take all contracted tonnage. Low-vol coal inventory increased during the quarter by 55,000 tons to 144,000 tons.
The average realized price for low-volatile metallurgical coal tumbled 21.1% to $97.54 per ton, while realized prices for high-volatile metallurgical coal were up 4.3% to $62.50 per ton. Realized prices for the company's thermal coal were down by 3.4% to $59.39 per ton in the quarter.
Total cost per ton sold, in the reported quarter, were $51.87 down 17 cents per ton year over year.
Gas Division
During the reported quarter, the company registered 3% year-over-year growth in gas production volumes to 38.6 billion cubic feet (Bcf). Gas production in the second quarter included 418 million cubic feet (MMcf) per day of natural gas, 335 barrels per day of oil/condensates, and 655 barrels per day of NGL
The average selling price of thousand cubic feet (Mcf) improved by 48 cents per Mcf. The improvement in sales volume and the selling price resulted in better contribution from this division.
Financial Update
As of Jun 30, 2013, cash and cash equivalents were $71.9 million while the total liquidity of the company was $1.445 billion.
Long-term debts as of Jun 31, 2013, were $3.17 billion, flat with the year-end 2012 level.
Cash from operating activities in the second quarter of 2013 was $125.1 million versus $138.4 million in the year-ago quarter.
Capital expenditure during the quarter was $352 million versus $407.9 million in the year-earlier quarter.
Guidance
CONSOL expects third quarter 2013 coal sales in the range of 13.4–13.9 million tons and 2013 coal sales in the range of 55.5−57.5 million tons. The company forecasts coal sales, in 2014, to improve from 2013 levels and reach 60.4 million tons. CONSOL expects 2015 coal sales to be 61.7 million tons.
CONSOL projects third quarter 2013 gas production in the range of 43–45 Bcf and 2013 production in the band of 170 -175Bcf. 2014 gas production is expected to improve to the range of 2010-225 Bcf.
Other Company Releases
Peabody Energy Corp. (BTU) reported second quarter 2013 earnings of 33 cents per share, widely beating the Zacks Consensus Estimated of a loss of 5 cents.
Arch Coal, Inc. (ACI) is expected to release its second quarter results before the market open on Jul 30, 2013. The Zacks Consensus Estimate for the quarter is at a loss of 32 cents.
Alpha Natural Resources Inc. (ANR) is expected to release its second quarter results before the market open on Aug 2, 2013. The Zacks Consensus Estimate for the quarter is pegged at a loss of 60 cents.
Our View
As expected the accident at CONSOL’s Blacksville No. 2 Mine during the second quarter disrupted operations. It not only resulted in a decline in total revenue but also led to expenses of $23.6 million, which impacted the bottom line of the company.
On the brighter side, the World Steel Association projects nearly 3% year-over-year growth in global steel usage in 2013 and 2014. CONSOL's met coal sales could receive a much needed tailwind from the improvement in steel demand. The company's guidance reflects an expected improvement of 45.8% in high vol met sales in 2014, which substantiates our view.
Based in Canonsburg, PA, CONSOL Energy is a multi-fuel energy producer as well as energy services provider, catering to customers worldwide. CONSOL Energy presently retains a Zacks Rank #3 (Hold).
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