Diversified fuel producer CONSOL Energy Inc. (CNX) reported pro forma earnings of 25 cents per share for the fourth quarter of 2014, beating the Zacks Consensus Estimate of 20 cents by 25%.
GAAP income at the company was 32 cents per share versus $3.20 per share in the prior-year quarter. The difference between GAAP and operating income in the reported quarter was due to adjustments relating to discontinued operations.
GAAP earnings per share were 70 cents for 2014, much lower than $2.87 reported in 2013.
Revenue
CONSOL Energy’s quarterly revenues increased 13.4% to $0.93 billion from $0.82 billion in the year-ago quarter. The top line, however, lagged the Zacks Consensus Estimate of $0.95 billion by 1.3%.
CONSOL Energy’s 2014 revenue increased nearly 13% to $3.72 billion from $3.29 billion in 2013. The top line also surpassed the Zacks Consensus Estimate by 0.8%.
The year-over-year improvement in total revenue was primarily due to better contribution from the natural gas division.
Segment Performance
Coal Division
In the quarter, the company produced 8 million tons of coal. Of the total production, 6.4 million tons came from the Pennsylvania operations, 1 million tons from Virginia operations and 0.6 million tons from Other operations.
The company sold 6.5 million tons of coal from its Pennsylvania Operations, up 1 million tons from the year-ago quarter. However, the realized price per ton of coal decreased 3.6% year over year to $60.10 per ton.
From its Virginia Operations, the company sold 1.1 million tons of coal, down 8.3% year over year, with the sale price per ton down by nearly 15.7% year over year to $68.58 per ton.
From its Other Operations, the company sold 0.5 million tons, unchanged from the year-ago level. However, the sale price per ton was down nearly 22.1% year over year to $59.38 per ton.
Exploration & Production (E&P) Division
During the reported quarter, the company registered 45% year-over-year growth in gas production volumes to 70.5 billion cubic feet equivalent (Bcfe).
Despite an increase in gas output, full benefit could not be realized due to a decline of 36 cents in the average selling price per one thousand cubic feet (Mcf).
Financial Update
As of Dec 31, 2014, the company had a cash balance of $176.9 million versus $327.4 million as of Dec 31, 2013.
Total long-term debts as of Dec 31, 2014 were $3.27 billion, higher than $3.16 billion as of Dec 31, 2013.
Cash from operating activities in 2014 was $0.94 billion versus $0.66 billion in 2013.
Capital expenditure in 2014 was $1.49 billion, on par with the year-ago level.
Guidance
CONSOL Energy expects first-quarter 2015 coal sales in the range of 8.0–8.5 million tons and 2015 coal sales in the range of 30.5−33.0 million tons. The company expects 2016 coal sales to remain unchanged from 2015 levels.
CONSOL Energy projects first-quarter 2015 gas production in the range of 70–74 Bcfe and 2015 production in the band of 300–310 Bcfe. Gas production in 2015 is expected to exceed the 2014 production level by 30%.
Total gas production hedged by the company for the first quarter is 29.9 Bcfe, at an average price of $4.05 per Mcf. During the fourth quarter, the company raised its 2015 gas hedge position from 27% to 45%.
The company will continue with its capital investment in 2015 and has plans to invest in excess of $1.4 billion in 2015. CONSOL expects to invest nearly $1 billion in its E&P division.
Other Upcoming Releases
Arch Coal Inc. (ACI) is slated to release its fourth-quarter 2014 results on Feb 3, 2015. The Zacks Consensus Estimate is pegged at a loss of 38 cents.
Walter Energy, Inc. (WLT) is slated to release its fourth-quarter 2014 earnings on Feb 19. The Zacks Consensus Estimate stands at a loss of $1.60.
Natural Resource Partners LP (NRP) is slated to release its fourth-quarter 2014 earnings on Feb 11. The Zacks Consensus Estimate is 30 cents.
Our View
CONSOL Energy has shifted its focus to natural gas and has thus divested a few of its coal assets. During the quarter, the board of directors of CONSOL Energy decided to separate its coal business to form a thermal MLP and a metallurgical coal subsidiary.
Though this move is unlikely to have an immediate impact, it will definitely benefit the company in the long term, with separate management teams assigned to run each of the businesses.
CONSOL Energy is on course to achieve a 30% gas production increase annually in the 2014–2016 time frame. Its systematic capital investments in developing its Marcellus and Utica shale operations will help the company to meet this objective.
CONSOL Energy presently retains a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment