Diversified fuel producer
) announced sequentially lower coal and natural gas production
expectation for the first quarter of 2013. The company expects
coal production in the range of 13.7 - 14.1 million tons, while
gas production is expected to come between 39 - 41 billion cubic
feet equivalents (Bcfe). The frac schedule and seasonal factors
were the root cause for the sequential decline in expected gas
The softness in demand in the coal industry had an adverse impact
on coal production. During the year CONSOL had to idle mines to
lower its accumulated coal inventory. The fourth quarter
production of 14.3 million tons and 2012 production of 56.0
million tons were lower than 15.2 million tons and 62.0 million
tons produced in the corresponding prior-year period.
However, the gas division fared well year on year both for the
quarter and the full year. The increasing use of gas for power
generation was the primary factor for the uptrend. The fourth
quarter gas production of 41.8 Bcfe and 2012 production of 156.3
Bcfe were higher than 39.7 million tons and 153.5 million tons
produced in the corresponding prior-year period.
What Lies Ahead?
As per a report published by International Energy Agency, in Dec
2012, the coal industry is headed for a turnaround. The share of
coal in the global energy mix will continue to rise in the next
five years. In addition China and India will play a key role,
with both countries importing bulk volumes to meet increasing
domestic energy requirement.
However, COSOL Energy along with other coal operators like
Peabody Energy Corporation
Arch Coal Inc.
Walter Energy Inc.
) will have to face increasing competition from Indonesian and
Australian coal producers. In addition, cheap domestic gas prices
and a growing consciousness to use renewable power would restrict
the use of coal in the U.S.
CONSOL's coal division contributes more than 90% of the revenue
stream of the company. So any improvement in the coal position
will help the company to report better results.
Overall, we believe the demand for coal will be driven by import
from China, India and Japan. Global demand will start to pick up
as the year progresses. We in fact believe CONSOL's coal guidance
in the range of 55.5 to 57.5 million tons for 2013 is on the
CONSOL Energy Inc., based in Canonsburg, Pennsylvania, is a
multi-fuel energy producer and an energy services provider,
primarily catering to the U.S. power producers. The company
presently retains a short-term Zacks Rank #3 (Hold).
ARCH COAL INC (ACI): Free Stock Analysis
PEABODY ENERGY (BTU): Free Stock Analysis
CONSOL ENERGY (CNX): Free Stock Analysis
WALTER ENERGY (WLT): Free Stock Analysis
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