CONSOL Energy Inc.
) divulged its updated resource reserves figures for the year
2012. The company added 954 billion cubic feet equivalent (Bcfe)
of net proved reserves in its kitty via extensions and
discoveries. This brings total proved reserves at the end of 2012
to around 3.993 trillion cubic feet equivalent (Tcfe), recording
a 15% increase from the 2011 level.
The major contributor to the reserve pool was the Marcellus
Shale play which brought in about 94% of the hydrocarbons. The
Marcellus block witnessed proved reserves growth of 105% to 1,805
Bcfe from 882 Bcfe in 2011. Meanwhile proved developed reserves
("PUD") increased 79% to 427 Bcfe from 239 Bcfe in 2011.
Proved reserves were 46% of the proved undeveloped ones in
2012 compared with 39% in 2011. These exclude the prior
classified proved developed reserves and include undeveloped
reserve supplements from the Marcellus prospect. The 1,379 Bcfe
of PUD from Marcellus reflects 38% of the total estimated to be
drilled in the next five years.
Oil, condensates and liquids accounted for 2.2% or 88 Bcfe in
the total proved reserves basket. Approximately 611% of natural
gas production was replaced by CONSOL bringing the net output to
156 Bcfe in 2012. CONSOL Energy also clocked total proved,
probable and possible reserves of 22.2 Tcfe at the end of 2012,
reflecting a 10% surge from the 2011 reserve level.
Overall net adjustments including performance revisions, plan
alterations and reserves loss owing to price lowered reserves by
285 Bcfe. This entails a 242 Bcfe increase from performance
revisions with a concomitant fall of 527 Bcfe from price
adjustments and plan changes. Price adjustments were based on
2012 price figures of $2.76 million British thermal units (MMBtu)
compared with $4.12 MMBtu in 2011 and includes no reserve
Plan alterations led to a decline in drilling activities and
shifting of focus away from the non-core properties while weak
natural gas prices made CONSOL Energy veer towards its
high-return Marcellus operations. The company's projected
drilling and completion costs related to extensions and
discoveries in 2012 were $440.7 million.
We believe the rising demand for coal in the emerging markets
of China and India will boost metallurgical coal exports at
CONSOL Energy. It is believed that domestic production in these
countries is not sufficient to meet the increasing demand for
The company will also benefit from the promising potential
offered by the Brazilian markets particularly with the
implementation of favorable monetary, fiscal and tax policies
that brought about an upside in steel utilization rates.
Moreover, normal winter weather and an expected upswing in
natural gas prices could act as tailwinds.
However, regulatory pressure and underground operational risk
are negatives that could undermine the growth opportunities.
Presently, the company carries a Zacks Rank #3 (Hold).
We as of now prefer Zacks Rank #2 (Buy) stocks
Natural Resource Partners L.P.
DTE Energy Company
The AES Corporation
Based in Canonsburg, PA, the company produces coal and natural
gas for energy and raw material markets.
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CONSOL ENERGY (CNX): Free Stock Analysis
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