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CONSOL Unveils 2013 Capex Guidance - Analyst Blog

Posted
1/15/2013 12:30:00 PM
By: Zacks.com
Referenced Stocks:CNX;HES;NBL

CONSOL Energy Inc. ( CNX ) has announced its full-year 2013 capital expenditure guidance in the range of $1,290 - $1,505 million.

In 2013, the company intends to invest $410 - $520 million under its coal projects. Out of the total investment, $835 - $935 million and $45 - $50 million will be allocated for gas and water operations, respectively. Total capital expenditure of these three segments will be adjusted from the net proceeds of future sales in the band of $455 - $640 million. As a result net investment by the company for full-year 2013 would come to just $835 - $865 million.

The company's full-year 2012 capital expenditure guidance was $1.7 billion. Almost 50% year-over-year drop in capital spending is driven by investment-slash in coal and water operations. The company currently focuses on rebalancing its existing assets without addition of new assets, thereby leading to spending cut down.

CONSOL Energy expects to manage full-year 2013 capital expenditure funding from its operating cash flow and will primarily utilize net proceeds from the forthcoming assets sales. In the first nine months of 2012, the company's income from operating activities was $530.2 million and cash balance was $231 million as on September 30, 2012. CONSOL Energy's available liquidity stands at $2.6 billion, which will boost the company's future development goals. In addition, the company will collect final installment of $328 million from Noble Energy, Inc. ( NBL ) for its asset sales and will manage the remaining balance from other two property sales with price range of $127 - $312 million. Moreover, strong financial position as well as proceeds from previous sales enables CONSOL Energy to pursue a steady organic growth strategy.

Under coal operations program, CONSOL Energy primarily focuses on the completion of its BMX Mine and plans to deploy $166 million in 2013. The company is in no mood to make any new investments in its coal segments this year, but instead will focus on production maintenance activities with investment of $318 million.

For gas operations, the company allocated $660 million for drilling activities and $128 million for gathering and compression operations. The company plans to utilize $160 million for its production-maintenance operations. In the CONSOL Energy - Hess Corporation ( HES ) joint venture in the Utica Shale, the company plans to invest $122 million, primarily for the drilling of 27 (gross) wells.

On the other hand, CONSOL Energy plans to pay out $600 million for the development of its liquids-rich Marcellus Shale assets, including drilling capital of $415 million.

Under full-year 2013 coalbed methane ("CBM") program, the company curtailed its drilling activities and intends to invest $65 million, which is flat with the previous year figure.

CONSOL Energy expects its full-year 2013 gas production to be in the range of 170-180 billion cubic feet equivalent ("Bcfe"), including approximately 250 thousand barrels ("MBbls") of oil and 1,200 MBbls of condensate and natural gas liquids ("NGLs").

In the first nine months of 2012, CONSOL Energy's capital expenditure was $1.2 billion. The company is focusing on the development prospects at the Marcellus and Utica play. The company generated higher production levels from this region during third-quarter 2012. We anticipate that these potential resource-rich areas will continue to spur growth in the near term. In addition, CONSOL Energy's new BMX mine is set to come online in 2014, which will further add to its top line.

However, we are concerned about prevailing sluggish demand from global steel market and over-reliance on limited group of customers for bulk coal purchase. CONSOL Energy currently has a short-term Zacks Rank #3 (Hold).

Canonsburg, Pennsylvania-based CONSOL Energy is a multi-fuel energy producer as well as energy services provider, primarily catering to the U.S. power generators.



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