CONSOL Energy Inc.
) announced its intention to discontinue the Miller Creek surface
operations for a temporary period due to required permit delays
from the U.S. Environmental Protection Agency ("EPA"). This
operation is located near Naugatuck, West Virginia.
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Per the notice, the company intends to idle its Wiley Surface
Mine, Wiley Creek Surface Mine, Minway Surface Mine, Minway
Preparation Plant, and Miller Creek Administration Group for a
period of 14-days beginning from December 30, 2012. This
temporary halt in operations will result in lay off of 145
employees. However, the shut down will not affect the underground
operations of the company.
We know that temporary closure of the Miller Creek surface
operations has company specific as well as social blows. Year to
date, the output of this operations was 1.55 million tons of
coal, including 83% gathered from surface operations. This
shutdown has yearly direct estimated economic impact of $161.6
million. In addition, it also delays mine and highway projects in
Mingo County and the state of West Virginia, which subsequently
fails to create new employments.
However, we consider this idling as a positive move after
considering present global coal consumption trend. Currently,
several coal companies' exercised planned production slashes to
tackle supply-demand equilibrium. Last month, the company's peer
Peabody Energy Corporation
) permanently discontinued coal production at its Air Quality
Mine in Vincennes, Indiana, due to weak market conditions. We
have observed that sluggish recovery of the U.S. economy, planned
production curtailment in the manufacturing sector and decline in
electricity generation is denting the demand for coal.
In the third quarter of 2012, CONSOL Energy reported pro forma
loss of 5 cents per share, lower than the Zacks Consensus
Estimate of earnings of 2 cents per share. Quarterly earnings
were way below the year-ago quarter's earnings of 73 cents.
The company's third-quarter 2012 revenue decreased 23.7% to
$1,160.1 million from $1,521.7 million in the prior-year quarter.
The top line fell short of the Zacks Consensus Estimate of
CONSOL Energy's quarterly results negatively impacted due to low
sales from the Buchanan mine, a couple of shutdown in operations
at certain plants along with unplanned outages at the Enlow Fork
and Bailey mines.
We believe slow recovery of natural gas prices will increase the
demand in the following quarters, which will subsequently enable
the company to improve its forthcoming financial results.
However, continued weakness in global steel consumption rates,
stringent regulations and price volatilities are creating
obstacles for CONSOL Energy's performance.
CONSOL Energy Inc. currently has short-term Zacks #4 Rank (Sell
Canonsburg, Pennsylvania-based CONSOL Energy Inc. produces coal
and natural gas for energy and raw material markets. With a
market capitalization of $8.01 billion, CONSOL Energy has 9,157