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CONSOL (CNX) Q2 Earnings Beat Estimates, E&P Guidance Raised

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Diversified fuel producer, CONSOL Energy Inc. (CNX - Free Report) reported earnings of 17 cents per share in second-quarter 2017, beating the Zacks Consensus Estimate of 10 cents by 70.0%.

Revenue

CONSOL’s total revenue of $865.9 million in the second quarter of 2017 surpassed the Zacks Consensus Estimate of $673 million by 28.7%.

Total revenue was also 202.9% higher than $285.9 million recorded in the year-ago period. The year-over-year increase was due to higher contribution from mining operations, Exploration and Production (E&P) Division and gain on sale of assets.

CONSOL Energy Inc. Price, Consensus and EPS Surprise

 

CONSOL Energy Inc. Price, Consensus and EPS Surprise | CONSOL Energy Inc. Quote

 

Segment Performance

Pennsylvania (PA) Mining Operations Division

Pennsylvania Operations sold 6.8 million tons of coal in the reported quarter compared with 6.2 million tons in the year-ago period.

Total cost of coal sold was $34.79 per ton, higher than $34.46 in the year-ago quarter. The increase in cost was due to additional equipment maintenance.

Total sales price per ton was $44.75 compared with $40.61 in the prior-year quarter. Thanks to improvement in sales price, average margin per ton sold in the reported quarter was $9.96 compared with $6.15 per ton in the year-ago quarter.

Exploration & Production (E&P) Division

CONSOL registered a 7% year-over-year reduction in gas sales volumes to 92.2 billion cubic feet equivalent (Bcfe) in second-quarter 2017. The decline was primarily due to timing delays associated with the TIL schedule.

The average sales price of $2.47 per thousand cubic feet gas equivalent (Mcfe), when combined with unit costs of $2.20 per Mcfe, resulted in a margin of 27 cents per Mcfe. This indicated a 17.4% year-over-year increase in the E&P margin of 23 cents per Mcfe.

Financial Update

As of Jun 30, 2017, the company’s cash and cash equivalents were $299.1 million, up from $60.5 million as of Dec 31, 2016.

Total long-term debts as of Jun 30, 2017 were $2.63 billion, down from $2.76 billion as of Dec 31, 2016.

Cash from operating activities in second-quarter 2017 was $88.8 million compared with $82.9 million in second-quarter 2016.

Capital expenditure in the second quarter of 2017 was $160.4 million, up substantially from the year-ago level of $37.6 million.

Guidance

CONSOL reiterated its 2017 E&P Division production to the range of 420–440 Bcfe. It raised its 2017 E&P capital expenditure in the range of $620–$645 million, up from the previous guidance of $555 million.

The company also raised its 2018 E&P Division production to a range of 520–550 Bcfe from the earlier guidance range of 490–520 Bcfe.

Our View

CONSOL was able to surpass both earnings and revenue estimates this quarter, thanks to strong contribution from coal and natural gas business. Its focus on E&P business continues to yield positive results.

CONSOL has taken initiatives to separate its mining and E&P divisions. The company’s E&P business has excellent long-term prospects. This is due to increasing focus of utilities toward using natural gas to produce electricity. Thanks to its solid asset base, it is well poised to achieve the E&P production targets.

CONSOL currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

CNX Coal Resources LP (CNXC - Free Report) reported earnings of 40 cents per unit in the second quarter, missing the Zacks Consensus Estimate of 51 cents by 21.6%.

Arch Coal (ARCH - Free Report) reported second-quarter 2017 adjusted earnings of $1.85 per share, lagging the Zacks Consensus Estimate of $2.45 by 24.5%.

SunCoke Energy (SXC - Free Report) reported second-quarter 2017 loss of 7 cents per share, narrower than Zacks Consensus Estimate of a loss of 14 cents.

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