CONSOL Energy Inc
) completed the sale of its Consolidation Coal Company (CCC)
subsidiary to an unit of Murray Energy Corporation for $3.5
billion. The divestiture was announced in late October this year.
The divestment was intended to intensify focus on achieving gas
production targets of 210-225 Bcfe for 2014 and gas production
growth of 30% annually in 2015 and 2016.
The assets of the CCC subsidiary include five longwall coal mines
- McElroy, Shoemaker, Robinson Run, Loveridge and Blacksville No.
2 mines - in West Virginia that produced a combined 28.5 million
tons of thermal coal in 2012. In addition, the company will also
sell its river and dock operations with a fleet of 600 barges and
The sales consideration comprises $850 million cash and Murray
Energy assuming $2.4 billion of CONSOL's liabilities.
Additionally, nearly $184 million is expected as future payment
from the retention of a royalty on select reserves and tolling
fees at CONSOL Energy's Baltimore Terminal.
Murray Energy is also assuming CONSOL's UMWA 1974 Pension
Trust obligations worth approximately $941 million at present.
The transaction, in a way, has also helped CONSOL deleverage its
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The transaction also includes CONSOL guarantying some of the
commercial liabilities acquired by Murray Energy or will become
the direct payee of Murray Energy for future payments, though for
a transitional period. However, it will not impact CONSOL
Due to the divestiture, CONSOL expects to record a pre-tax gain
of about $1.3 billion along with a cash tax-benefit. Moreover,
the company expects to lower its administrative expenses by $65
million annually, favorably impacting margin expansion.
CONSOL also expects to pay regular dividend effective from the
first quarter of 2014 at a quarterly rate of 6.25 cents per
share. The annualized rate implies a yield of 0.7% based on
yesterday's closing price. The company seeks to better align its
dividend policy reflecting its growth strategy, though the yield
still lags the industry average substantially.
Arch Coal Inc.
), another player from the same industry closed the sale of its
Canyon Fuel subsidiary on August for net cash proceeds of $423
million. The assets included Sufco and Skyline longwall mines and
the Dugout Canyon continuous miner operation as well as a total
of 105 million tons of coal reserves in Utah.
CONSOL presently carries a Zacks Rank #3 (Hold). However, some
better-ranked coal stocks include
Alpha Natural Resources, Inc
Suncoke Energy Partners, L.P.
). Both the stocks carry a Zacks Rank #2 (Buy).