CONSOL Sheds Non-performing Assets

The desire to be more competitive led CONSOL Energy (CNX - Analyst Report) to shed its non-performing coal assets in Canada. The diversified fuel producer signed two agreements right before the end of 2012 to hive assets, which failed to generate any revenue throughout the year.

CONSOL entered into a contract with a unit of Forbes & Manhattan Inc. ("F&M") to sell 100% of the Ram River and Scurry Ram coal properties located in Alberta, Canada for $102.5 million. The other transaction was with Riversdale Resources to sell some coal assets in Alberta for $24 million.

CONSOL Energy has been working consistently to generate funds by hiving its non-performing assets. Before these twin transactions, the company generated $224 million by selling its non-performing assets in 2012. The current transactions, worth $127 million, will take the total value of assets sold to more than $350 million.

In 2012, coal operators suffered from a slackness in coal demand, and CONSOL Energy was no exception. Besides, the company had to idle its Miller Creek surface operations near Naugatuck, West Virginia, citing permit delays that prevented the company from securing all the necessary environmental permits required to continue mining.

CONSOL faced problems in 2012 and its earnings results for the first nine months of the year were lower than our estimates. Given the present scenario, nothing much is going to change in the fourth quarter of 2012. The stock’s current position is aptly reflected in our short-term Zacks #5 Rank (Strong Sell).

CONSOL Energy also plans to sell a few more non-performing assets in 2013 and utilize the funds in more profitable ventures going forward. We believe that besides selling the non-core assets, cost cutting measures, if implemented, will definitely improve margins.

Although CONSOL is trying hard to improve its performance, the investing community is not too impressed with the performance of the company. Over the past twelve months, the share value has gone down by 21.1% to $31.93.

The coal operators are hoping for a rebound in 2013. Another coal operator Peabody Energy Corporation (BTU - Analyst Report), having a short-term Zacks #4 Rank (Sell), expects its earnings on the lower side in the first quarter of 2013, with performance improving as the year progresses.

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