CONSOL Energy Announces Operations Update
Gas Division Production Ramp Is on Track to Meet 2014 Guidance;
Gas Division Signs Utica Shale Infrastructure Agreement;
Coal Division Produces 14.5 Million Tons in Quarter;
Expects Modestly Positive Q3 Pre-Tax Income
PITTSBURGH, Oct. 15, 2013
PITTSBURGH, Oct. 15, 2013 /PRNewswire/ --CONSOL Energy Inc. (NYSE: CNX) is
providing an operations update for the quarter ended September 30, 2013. The
company produced and sold more gas and coal during the quarter than expected.
CONSOL also signed a definitive agreement for infrastructure build-out in the
Utica Shale, in Noble County, Ohio.
CONSOL's Gas Division produced 46.1 Bcfe for the 2013 third quarter, or 17%
more than the 39.5 Bcfe produced in the 2012 third quarter. Third quarter
production guidance had been 43 − 45 Bcfe. The 2013 third quarter production
included 491 MMcf per day of natural gas, 397 barrels per day of
oil/condensates, and 1,340 barrels per day of NGLs (all figures are net to
"Our gas production growth is beginning to accelerate as we and our Marcellus
Shale partner expand the rig count. We now have a record 8 rigs drilling in
the Marcellus Shale on our JV acreage. For 2014, we and Noble Energy expect to
be operating at least this many rigs," commented J. Brett Harvey, chairman and
chief executive officer. "Our rebounding rig count and our well results will,
we believe, enable us to achieve our 2014 production guidance of 210 – 225
Bcfe, which represents a 22% – 30% growth rate over expected 2013 production."
CONSOL's Coal Division produced 14.5 million tons for the third quarter of
2013, including 1.1 million tons of low-vol coking coal from the company's
Buchanan Mine. These figures exceeded third quarter guidance of 13.4 – 13.9
million tons, which included low-vol tons of 0.7 – 0.9 million tons. These
production results were achieved despite the operational challenge that was
overcome at the company's Pennsylvania Operations.
As of September 30, 2013, CONSOL's total coal inventory increased by 158,000
tons to 1,075,000 tons. Thermal coal inventory increased by 198,000 tons to
971,000 tons, while low-vol coal inventory decreased by 40,000 tons, to
CONSOL Energy will formally announce third quarter results on October 31.
Currently, the company believes pre-tax income for the quarter could be
modestly positive, after adjusting for several discrete items: asset sale
gains, pension settlement expense, title defects expense, and consultant fees.
However, net income is likely to be a loss for the quarter.
Gas: CONSOL Energy expects fourth quarter 2013 gas production, net to CONSOL,
to be between 46 – 48 Bcfe, which, using the midpoint of the range, would be a
12% increase as compared with the 41.8 Bcfe produced in the fourth quarter of
2012. If achieved, this would result in 2013 annual production of
approximately 170 – 172 Bcfe, which is within our earlier 2013 guidance of 170
– 175 Bcfe.
Coal: CONSOL Energy expects fourth quarter 2013 coal production to be between
13.6 – 14.0 million tons. If achieved, annual 2013 total coal production will
be between 56.7 – 57.1 million tons. Buchanan Mine's fourth quarter production
is expected to be between 0.7 – 0.9 million tons; and, if achieved, annual
low-vol production will be between 4.3 – 4.5 million tons.
2014 Gas Forecast
CONSOL Energy expects 2014 production guidance to remain unchanged at 210 –
225 Bcfe, which represents a 22% - 30% growth rate over the midpoint of the
2013 forecast. The 2014 production guidance assumes a liquids content of
between 7% – 8% of the total.
Gas Division Operations
CONSOL's Gas Division saw zero safety exceptions in the third quarter of 2013,
which is unchanged compared to the same quarter of 2012. In the area of
compliance, CONSOL's Gas Division saw violations decrease by over 60%, from 11
to 4, compared to the year-earlier quarter.
During the third quarter, CONSOL Energy drilled 15 horizontal shale wells: 12
Marcellus Shale and three Utica Shale wells. The average drilled lateral
length for the Marcellus Shale wells and the Utica Shale wells was 8,817 feet
and 9,893 feet, respectively. CONSOL completed 21 Marcellus Shale wells and
three Utica Shale wells in the third quarter. Also, CONSOL turned in line 22
Marcellus Shale wells in the third quarter.
CONSOL's Gas Division continues to work with its JV partners to search for
bolt-on acquisition opportunities to support the company's core areas of
operations in the Marcellus and Utica Shale.
Marcellus Shale Dry Gas (CONSOL Energy-operated):
Southwest Pa.: During the third quarter, CONSOL drilled seven wells on the NV
55 pad in Washington County. The wells ranged in lateral length from 8,821
feet to 9,777 feet.
CONSOL completed 14 wells in Washington County, with 10 of the 14 wells using
shorter stage length completion techniques. Also during the third quarter,
CONSOL turned in line 14 wells: four wells on the MOR 20 pad, the final three
wells on the six-well NV 39 pad, and seven wells on the NV 38 pad. The four
wells on the NV 38 pad, which were completed using shorter stage lengths, have
exhibited elevated initial production rates when compared to surrounding wells
in the area that did not utilize this technique. The most notable is the NV
38C well with initial production at a remarkable rate of 19.0 MMcfd.
CONSOL's first Upper Devonian well, the NV 39F, which was drilled in the
Burkett Shale and turned in line in June 2013 at 3.0 MMcfd, has exhibited a
nearly flat decline rate and was still producing 2.9 MMcfd at the end of the
third quarter. The two underlying Marcellus Shale wells located underneath the
NV 39F well are current producing at, or above, expected projections. CONSOL
is planning to drill additional Burkett Shale wells and to further test Upper
Devonian wells located in the Rhinestreet Shale formation from Marcellus pads
CONSOL has one horizontal rig operating and plans to drill an additional seven
wells in Southwest Pa., which is an increase from previous guidance provided
last quarter to now drill 27 wells in 2013.
Central Pa.: During the third quarter, CONSOL did not drill any wells in
CONSOL completed and turned in line four wells located on the Bowers 1 pad in
Jefferson County. These four wells were drilled in 2012 with lateral lengths
ranging from 3,791 feet to 4,656 feet and had initial production rates
averaging approximately 3.0 MMcfd. CONSOL also turned in line the final four
wells on the Kuhns 3 pad, which were completed in the previous quarter. In
total, the five-well Kuhns pad was producing approximately 25.0 MMcfd at the
end of the third quarter.
CONSOL is currently moving one horizontal rig into Central Pa. and expects to
drill five additional wells in Westmoreland County, which is consistent with
previous guidance provided last quarter to drill 10 wells in 2013.
Northern W.Va.: During the third quarter, CONSOL drilled five wells: one well
on the CENT 3 pad in Upshur County, one well on the AUD 3 pad in Barbour
County, and the final three of six wells on the PHL 13 pad in Barbour County.
The wells ranged in lateral length from 7,586 feet to 9,974 feet. The CENT 3A
and AUD 3D were drilled as delineation wells to test the productivity between
the Philippi Field to the North and the Alton Field in Southern Upshur County.
CONSOL completed three of the six wells located on the PHL 13 pad in Barbour
CONSOL has one horizontal rig operating in Upshur County and expects to drill
three additional wells, which is consistent with previous guidance provided
last quarter to drill 11 wells in 2013.
Marcellus Shale Wet Gas (Noble Energy-operated):
During the third quarter, in the wet gas portion of the Marcellus Shale, Noble
Energy drilled 15 wells: six wells in Marshall County, W.Va., six wells in
Washington County, Pa., and three wells in Doddridge County, W.Va. The wells
ranged in lateral length from 8,700 feet to 10,000 feet.
Noble Energy completed 20 wells: 11 wells on the SHL 8 pad located in Marshall
County, W.Va., seven wells on the WFN 1 pad in Washington County, Pa., and two
of the six wells on the NORM 1 pad in Gilmer County, W.Va. Noble Energy turned
in line 18 of the 20 wells during the quarter and expects to turn in line the
remaining two wells during the fourth quarter of 2013.
Noble Energy is currently operating five horizontal rigs and expects to drill
a total of 75 wells in 2013.
Ohio Utica Shale (CONSOL-operated):
During the third quarter, in the Utica Shale joint venture with Hess
Corporation, CONSOL drilled three wells located on the NBL 19 pad in Noble
County. The wells ranged in lateral length from 9,396 feet to 10,360 feet.
CONSOL completed three wells located on the NBL 11 pad in Noble County.
CONSOL expects to turn in line the NBL 11 and NBL 33 pads, and the NBL 16A
well early in 2014, while flowing production from the NBL 1A well is expected
early in the fourth quarter of 2013. On September 20, 2013, CONSOL Energy
entered into a definitive agreement with Blue Racer Midstream to construct,
own and operate gathering pipelines and facilities to support production with
our joint venture partner, Hess Corporation. This agreement provides takeaway
capacity for current Noble County activity to-date utilizing existing
infrastructure in the area and, following additional construction, will
support further development plans, which will allow for delivery of future
Utica Shale production to market.
Consistent with previous guidance provided last quarter, CONSOL completed its
2013 drilling program in the Utica Shale with a total of nine wells drilled.
As a result, CONSOL is no longer operating a horizontal rig in the Utica Shale
but has moved the rig to support further drilling activity in CONSOL's
operating area of the Marcellus Shale.
Ohio Utica Shale (Hess-operated):
During the third quarter, our joint venture partner, Hess Corporation, drilled
two wells in Guernsey County.
Hess completed four wells at their Oxford A pad and also turned in line the
Athens A 1H-24 well located in Harrison County.
Hess is currently operating two horizontal rigs on JV acreage. Their current
activity level is consistent with guidance provided last quarter.
Coal Division Operations
CONSOL's Coal Division saw safety exceptions increase 28%, from 40 to 51, in
the third quarter of 2013 compared to the same quarter of 2012 but saw
severity levels decline. In the area of environmental compliance, CONSOL's
Coal Division saw violations decrease by 40%, from 20 to 12, compared to the
The Coal Division overcame operational challenges and exceeded previous
quarter's production guidance. "Our ability to craft and execute a plan and to
accomplish what we set forth to accomplish, speaks volumes about the
dedication of our employees and their commitment to CONSOL's success,"
commented Jimmy Brock, COO-Coal.
BMX Mine, CONSOL's last Coal Division growth project, remains on track to come
online in April of 2014, bringing 5 million additional high-BTU tons, with
crossover capacity that can be sold into the thermal or high-vol markets.
Located at CONSOL's Buchanan Mine's old Contrary Portal, a new service shaft,
which is intended to move equipment and supplies into and out of the mine
within closer proximity to active mining areas, is scheduled for completion in
the fourth quarter of 2013. Also, the Enlow Fork overland belt project remains
on schedule to be complete in the fourth quarter of 2013. This project
replaces 6.8 miles of underground belt and will allow for more efficient
transportation of the coal to the preparation plant. These projects represent
the last stage of CONSOL's final coal efficiency upgrades.
Earnings Release Information
CONSOL Energy will report additional operational and financial results for the
quarter ended September 30, 2013 at 7:00 a.m. ET on Thursday, October 31,
followed by a conference call at 10:00 a.m. ET. The call can be accessed at
the investor relations section of the company's web site, at
Various statements in this release, including those that express a belief,
expectation or intention, may be considered forward-looking statements (as
defined in Section 21E of the Exchange Act) that involve risks and
uncertainties that could cause actual results to differ materially from
projected results. Accordingly, investors should not place undue reliance on
forward-looking statements as a prediction of actual results. The
forward-looking statements may include projections and estimates concerning
the timing and success of specific projects and our future production,
revenues, income and capital spending. When we use the words "believe,"
"intend," "expect," "may," "should," "anticipate," "could," "estimate,"
"plan," "predict," "project," or their negatives, or other similar
expressions, the statements which include those words are usually
forward-looking statements. When we describe strategy that involves risks or
uncertainties, we are making forward-looking statements. The forward-looking
statements in this press release, if any, speak only as of the date of this
press release; we disclaim any obligation to update these statements. We have
based these forward-looking statements on our current expectations and
assumptions about future events. While our management considers these
expectations and assumptions to be reasonable, they are inherently subject to
significant business, economic, competitive, regulatory and other risks,
contingencies and uncertainties, most of which are difficult to predict and
many of which are beyond our control. These risks, contingencies and
uncertainties relate to, among other matters, the following: deterioration in
global economic conditions in any of the industries in which our customers
operate, or sustained uncertainty in financial markets cause conditions we
cannot predict; an extended decline in demand for or in the prices we receive
for our coal and gas affecting our operating results and cash flows; our
customers extending existing contracts or entering into new long-term
contracts for coal; the expiration or failure to extend existing long-term
contracts; our reliance on major customers; our inability to collect payments
from customers if their creditworthiness declines; the disruption of rail,
barge, gathering, processing and transportation facilities and other systems
that deliver our coal and gas to market; a loss of our competitive position
because of the competitive nature of the coal and gas industries, or a loss of
our competitive position because of overcapacity in these industries impairing
our profitability; our failure to maintain satisfactory labor relations; coal
users switching to other fuels in order to comply with various environmental
standards related to coal combustion emissions; the impact of potential, as
well as any adopted regulations relating to greenhouse gas emissions on the
demand for coal and natural gas, as well as the impact of any adopted
regulations on our coal mining operations due to the venting of coalbed
methane which occurs during mining; foreign currency fluctuations could
adversely affect the competitiveness of our coal abroad; the risks inherent in
coal and gas operations being subject to unexpected disruptions, including
geological conditions, equipment failure, timing of completion of significant
construction or repair of equipment, fires, explosions, accidents and weather
conditions which could impact financial results; our focus on new gas
development projects and exploration for gas in areas where we have little or
no proven gas reserves; decreases in the availability of, or increases in, the
price of commodities and services used in our mining and gas operations, as
well as our exposure under "take or pay" contracts we entered into with well
service providers to obtain services of which if not used could impact our
cost of production; obtaining, maintaining and renewing governmental permits
and approvals for our coal and gas operations; the effects of government
regulation on the discharge into the water or air, and the disposal and
clean-up of, hazardous substances and wastes generated during our coal and gas
operations; the effects of stringent federal and state employee health and
safety regulations, including the ability of regulators to shut down a mine or
well; the potential for liabilities arising from environmental contamination
or alleged environmental contamination in connection with our past or current
coal and gas operations; the effects of mine closing, reclamation, gas well
closing and certain other liabilities; uncertainties in estimating our
economically recoverable coal and gas reserves; defects may exist in our chain
of title and we may incur additional costs associated with perfecting title
for coal or gas rights on some of our properties or failing to acquire these
additional rights we may have to reduce our estimated reserves; the outcomes
of various legal proceedings, which are more fully described in our reports
filed under the Securities Exchange Act of 1934; the impacts of various
asbestos litigation claims; increased exposure to employee related long-term
liabilities; increased exposure to multi-employer pension plan liabilities;
minimum funding requirements by the Pension Protection Act of 2006 (the
Pension Act) coupled with the significant investment and plan asset losses
suffered during the recent economic decline has exposed us to making
additional required cash contributions to fund the pension benefit plans which
we sponsor and the multi-employer pension benefit plans in which we
participate; lump sum payments made to retiring salaried employees pursuant to
our defined benefit pension plan exceeding total service and interest cost in
a plan year; acquisitions and joint ventures that we recently have completed
or entered into or may make in the future including the accuracy of our
assessment of the acquired businesses and their risks, achieving any
anticipated synergies, integrating the acquisitions and unanticipated changes
that could affect assumptions we may have made and divestitures we anticipate
may not occur or produce anticipated proceeds including joint venture partners
paying anticipated carry obligations; the anti-takeover effects of our rights
plan could prevent a change of control; increased exposure on our financial
performance due to the degree we are leveraged; replacing our natural gas
reserves, which if not replaced, will cause our gas reserves and gas
production to decline; our ability to acquire water supplies needed for gas
drilling, or our ability to dispose of water used or removed from strata in
connection with our gas operations at a reasonable cost and within applicable
environmental rules; our hedging activities may prevent us from benefiting
from price increases and may expose us to other risks; changes in federal or
state income tax laws, particularly in the area of percentage depletion and
intangible drilling costs, could cause our financial position and
profitability to deteriorate; and other factors discussed in the 2012 Form
10-K under "Risk Factors," as updated by any subsequent Form 10-Qs, which are
on file at the Securities and Exchange Commission.
The SEC permits oil and gas companies, in their filings with the SEC, to
disclose only proved, probable and possible oil and gas reserves that a
company anticipates as of a given date to be economically and legally
producible and deliverable by application of development projects to known
accumulations. We may use certain terms in this press release, such as EUR
(estimated ultimate recovery), unproved reserves and total resource potential,
that the SEC's rules strictly prohibit us from including in filings with the
SEC. These measures are by their nature more speculative than estimates of
reserves prepared in accordance with SEC definitions and guidelines and
accordingly are less certain. We also note that the SEC strictly prohibits us
from aggregating proved, probable and possible reserves in filings with the
SEC due to the different levels of certainty associated with each reserve
SOURCE CONSOL Energy Inc.
Contact: Investor: Dan Zajdel at (724) 485-4169; Tyler Lewis at (724)
485-3157, Media: Lynn Seay at (724) 485-4065
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