UPDATE: Consolidated Energy Earnings Fall On Lower Coal Sales
Volumes
(Updates with conference call, analyst comment and additional background
information.)
By Mark Peters
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Consol Energy Inc. (CNX) reported a drop in third-
quarter earnings as margins improved, but sales volumes fell amid record coal
stockpiles at U.S. power plants.
The Pittsburgh company reported earnings of $87.4 million, or 48 cents a
share, down from $90.1 million, or 49 cents a share, a year earlier. Revenue
fell 7% to $1.09 billion.
Analysts surveyed by Thomson Reuters expected per-share earnings of 66 cents
on revenue of $1.1 billion.
U.S. coal producers have been struggling with a supply glut of thermal coal
amid recession-weakened power demand and increased use of natural gas-fired
power plants that have displaced coal-fired plants. The industry has started to
see a rebound in demand for metallurgical coal used in steel production driven
by China.
Sales volumes for thermal coal were down 10% to 13 million tons, helping to
drive up production costs. But the company saw operating margins climb 77% as
the average realized price per ton rose to $58.07 from $46.75 on contracts
signed in prior years. Metallurgical coal sales volumes and operating margins
dropped from a year ago, but the company said a stronger market enabled it to
produce more than it expected.
Analysts at Dahlman, Rose & Co. described the quarter as disappointing in a
note to clients Thursday as the lower volumes and higher production costs caused
Consol to come up short of expectations. Shares were down 4.2% to $48.96 in
recent trading.
Executives during a morning conference call focused more on the company's
natural gas business, seeing continued weakness in the near term for thermal
coal.
"We still see 2010 as a bridge year" Consol Chief Executive J. Brett Harvey
said during the call, seeing a strong rebound in demand once the market
tightens.
Consol raised its natural gas production guidance for CNX Gas Corp. (CXG), of
which Consol owns 83%, and executives said they plan to acquire more acreage in
the Marcellus Shale this year. The company expects to grow to a total of 250,000
acres by year's end, focusing on southwest Pennsylvania and northern West
Virginia. Total acreage in the Marcellus Shale could grow to 400,000 acres,
eventually. CNX Gas has about 230,000 acres currently.
Executives see the coal business providing strong cash flow for the expansion
in natural gas, with Consol not planning additional coal projects without
customer commitments. CNX Gas raised production guidance to 92 billion cubic
feet from 89 billion cubic feet, with the company seeing gas prices for 2010 in
the range of $6 to $7 a million British thermal units.
CNX Gas reported net income attributable to shareholders of $35.5 million for
the third quarter, down from $67.4 million a year earlier.
-By Mark Peters, Dow Jones Newswires; 212-416-2457; mark.peters@dowjones.com
(END) Dow Jones Newswires
10-22-091251ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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