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Diversified fuel producer CONSOL Energy Inc. (CNX - Analyst Report) released production details for the third quarter of 2013. CONSOL also provided fourth quarter production guidance and 2014 gas production estimates.

Q3 Production and Inventory

The third quarter performance was better than CONSOL’s previous estimation. CONSOL Energy's Gas division produced 46.1 billion cubic feet equivalent (Bcfe) in the third quarter, up 17% from 39.5 Bcfe produced in the year-ago quarter. The gas production surpassed the guidance of 43 to 45 Bcfe. The production was 19.4% higher than 38.6 Bcf recorded in the second quarter.

Gas production in the third quarter included 491 million cubic feet (MMcf) per day of natural gas, 397 barrels per day of oil/condensates, and 1,340 barrels per day of NGL.  

CONSOL Energy's Coal division produced 14.5 million tons in the third quarter, including 1.1 million tons of low-vol coking coal from the company's Buchanan Mine. The coal production in the third quarter exceeded the guidance of 13.4–13.9 million tons. Coal production was 5% higher than 13.8 million tons produced in the second quarter.

CONSOL Energy’s total coal inventory in the third quarter increased 17.2% year over year to 1,075,000 tons. Thermal coal inventory increased by 198,000 tons to 971,000 tons during the quarter while low-vol coal inventory decreased during the quarter by 40,000 tons to 104,000 tons.


CONSOL’s fourth quarter 2013 gas production is expected to be approximately 46–48 Bcfe. 2013 gas production is expected to be in the range of 170–172 Bcfe, narrower than the prior guidance of 170 – 175 Bcfe.

CONSOL Energy expects fourth quarter 2013 total coal production in the range of 13.6–14.0 million tons while 2013 coal production is expected to range between 56.7–57.1 million tons.

CONSOL maintained its gas production guidance in the range of 210–225 Bcfe for 2014. The 2014 production guidance includes liquids content of 7%–8% of the total.

Our Take

The demand for natural gas is expected to increase, thanks to the Climate plan from the U.S. President, followed by stricter proposals from the U.S. Environmental Protection Agency (EPA) for granting permission for setting up new coal power plants.

The company is taking adequate steps to increase its natural gas production and will work with its partner Noble Energy Inc. (NBL - Analyst Report) in the Marcellus Shale to meet its 2014 gas production expectation.

CONSOL Energy incurred a loss in the second quarter as an accident in its Blacksville No. 2 Mine during the second quarter disrupted operations. It not only resulted in a decline in total revenue but also led to expenses of $23.6 million, which impacted the bottom line of the company.

CONSOL presently retains a Zacks Rank #5 (Strong Sell). However, all operators in the sector are not doing as badly as CONSOL Energy. The stocks worth considering in the space are Zacks Ranked #2 (Buy) James River Coal Co. and Peabody Energy Corp. (BTU - Analyst Report).

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