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CONSOL Lags Earnings, Beats Sales

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Diversified fuel producer CONSOL Energy Inc. (CNX - Free Report) reported earnings of 19 cents per share for the first quarter of 2013, a penny short of the Zacks Consensus Estimate. Earnings were substantially lower than the year-ago figure of 42 cents per share.

GAAP loss at the company was 1 cent versus earnings of 42 cents in the prior-year quarter. The difference between GAAP and operating earnings in the reported quarter was due to a one-time adjustment of 20 cents.


CONSOL Energy’s quarterly revenue decreased 9.6% to $1.29 billion from $1.43 billion in the year-ago quarter. The top line nominally surpassed the Zacks Consensus Estimate of $1.25 billion.

Segment Performance

Coal Division

In the quarter, the company produced 14.8 million tons of coal, out of which 1.3 million tons were of low-volatile metallurgical coal, 0.9 million tons were of high-volatility and 12.6 million tons were thermal coal. Out of the total thermal coal production, 12.0 million tons came from Northern Appalachia while 0.6 million tons were from Central Appalachia.

Higher coal demand in the quarter resulted in the decline of coal inventory. The total coal inventory of the company declined by 414,000 tons to 964,000 tons as of Mar 31, 2013.  The low volume Buchanan and Amonate inventory also decreased during the quarter by 153,000 tons to 89,000 tons. Thermal coal also decreased to 875,000 tons during the quarter.

The average realized price for low-volatile metallurgical coal tumbled 38.8% to $102.69 per ton, while realized prices for high-volatile metallurgical coal were up 7.3% to $66.72 per ton. Realized prices for the company's thermal coal production declined 4.6% to $59.01 per ton in the quarter.

Total costs per ton, in the reported quarter, were $64.42, down 29% year over year.

Gas Division

During the reported quarter, the company registered 4% year-over-year growth in gas production volumes to 39.2 Bcf (billion cubic feet).

Unit gas margins decreased despite a slight improvement in realized unit gas prices by $0.04 per thousand cubic feet (Mcf) to $4.30 per Mcf. Total unit gas costs increased mainly due to fees associated with in-transit transportation costs.

Financial Update

As of Mar 31, 2013, cash and cash equivalents were $25.1 million while the total liquidity of the company was $2.4 billion.

Long-term debts as of Mar 31, 2013 were $3.12 billion, flat with year-end 2012 level.

Cash from operating activities in the first quarter of 2013 was $268.3 million versus $229.5 million in the year-ago quarter.

Capital expenditure during the quarter was $405.9 million versus $306.5 million in the year-earlier quarter.


CONSOL expects second quarter 2013 coal sales in the range of 13.25–13.75 million tons and 2013 coal sales in the range of 55.5 − 57.5 million tons. The company expects coal production, in 2014, to be 62.6 million tons.

CONSOL expects second quarter 2013 gas production in the range of 38–40 Bcf and 2013 production in the band of 170 -180Bcf (up 8% to 15% year over year).

Other Company Releases

Peabody Energy Corp. (BTU - Free Report) reported first quarter 2013 loss of 5 cents per share, much narrower than the Zacks Consensus Estimate of a loss of 14 cents.

Arch Coal Inc. reported first-quarter 2013 pro forma loss of 34 cents per share, marginally wider than the Zacks Consensus Estimate of a loss of 32 cents.

Alpha Natural Resources Inc. is scheduled to report its first quarter 2013 results before the market open on May 2, 2013. The Zacks Consensus Estimate is at a loss of 58 cents.

Our View

In the reported quarter the company was able to substantially lower its production cost of coal. However, the lower sales price per ton of coal offset much of the positive impact  from cost savings.

CONSOL Energy plans to monetize some of its assets during 2013 and reinvest the proceeds in other lucrative projects. The guidance provided by the company indicates an improvement in coal sales in the forthcoming years. However, we prefer to remain bearish until we have a clearer picture of the movement of natural gas prices, which can impact thermal coal sales.

Based in Canonsburg, Pa., CONSOL Energy is a multi-fuel energy producer as well as energy services provider, catering to customers worldwide. CONSOL Energy presently retains a Zacks Rank #3 (Hold).

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