CONSOL Energy Inc. (CNX - Free Report) announced that the company has sold another 5% interest in the Pennsylvania mining complex and associated infrastructure to CNX Coal Resources LP (CNXC - Free Report) for $88.8 million. The transaction is effective from Sep 30 and it has increased CNX Coal’s share in the mining complex to 25%.
Divesture in Sync with Company’s Strategy
CONSOL Energy formed CNX Coal Resources LP, a thermal coal master limited partnership (MLP), comprising its thermal coal and mining properties in Pennsylvania. It operates the Bailey Mine, Enlow Fork Mine, Harvey Mine and the related preparation plant. The rationale behind creating the coal MLP was to gradually separate its coal operations from natural gas operations.
The decision to sell some interest from its Pennsylvania mining complex is a step toward the segregation of the two businesses.
CONSOL’s Focus on Natural Gas
Over the last few years, CONSOL Energy has been focused on shifting its business to natural gas from coal. The company is reducing its exposure to coal through assets sales and dropdowns to CNX Coal. In August, the company sold the Miller Creek and Fola mine complexes in southern West Virginia to Southeastern Land LLC. This deal marks CONSOL Energy’s definitive exit from the central Appalachian coal and surface mining operations.
CONSOL Energy’s focus on natural gas business has begun paying off. Contributions from the E&P assets to its top line have increased over the last three years and are expected to grow further in the long run. CONSOL Energy has also raised its 2016 E&P Division production guidance to 380–385 Bcfe from its prior expectation of 378 Bcfe.
Moreover, the company has formed a joint venture with Noble Energy, Inc. (NBL - Free Report) . The joint venture is called CONE Midstream Partners LP (CNNX - Free Report) . It owns sizeable midstream assets and is intended to aid CONSOL Energy transport increasing output from the Marcellus Shale. Going forward, this MLP will facilitate CONSOL Energy’s monetization of natural gas assets through additional dropdowns.
CONSOL Energy currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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