Eastern US coal and gas producer Consol Energy said Tuesday that its third-quarter coal production exceeded guidance provided in the second quarter, while margins decreased primarily as a result of lower sales prices per ton.
Consol said that "margins decreased primarily as a result of lower sale prices per ton, reflecting a decrease in the global metallurgical and thermal coal markets."
Partially offsetting lower sales prices was a 10% reduction in costs/st, the Pittsburgh-based coal and gas producer said in a statement released before the open of markets.
The company released its Q3 results a day after announcing that privately held Murray Energy will buy five of Consol's Northern Appalachian thermal coal mines and assume a number of related liabilities in a $3.5 billion purchase agreement. The West Virginia longwall mines produced 28.5 million st in 2012.
Consol will not hold its previously scheduled earnings call on Thursday morning due to Monday's call with financial analysts about the Murray transaction, Consol spokeswoman Lynn Seay said Tuesday.
Q3 coal production included 1.1 million short tons of low-volatility coking coal, 500,000 st of high-vol coking coal and 12.9 million st of thermal coal, Consol said, for a total of 14.5 million st. That compares with Q3 2012 total coal production of 11.6 million st.
Of the Q3 2013 thermal coal production, 12.4 million st was mined in NAPP and 500,000 st was mined in Central Appalachia, Consol said.
The low-vol sales price per ton in Q3 was $85.77 compared to $135.66/st in the year-ago quarter, and Consol sold all the low-vol coal it produced during the quarter.
The high-vol sales price was $60.42/st compared with $67.76/st in the year-ago quarter, again with Consol selling all the coal it produced.
The Thermal coal price was $59.08/st in Q3, compared with $62.11/st in the year-ago quarter, with Consol selling 12.8 million st of the 12.9 million st produced.
Consol said that costs per ton sold, across all coal products, were $50.46 during Q3, compared with $55.84/st from the year-ago quarter. "Per unit costs improved due to higher sales volumes and completed efficiency programs at the mines," Consol said.
Of the low-vol coal, from Consol's mainstay Buchanan underground mine in Virginia, and the high-vol Bailey coal, mined in southwestern Pennsylvania, Consol said it is ramping up sales from those mines into China, along with its traditional customer base.
"The demand for Bailey coal currently remains strong as the versatility allows it to compete as high vol, PCI and high-BTU thermal coal," Consol said.
The company also said it "was successful in securing large multi-year deals with key utility customers in the PJM and in the Southeast."
In Q4, the company "expects demand for contracted tonnage to remain steady as plants build their inventories in preparation for winter burn."
Consol also said it is in negotiations to contract 2 million-3 million st of thermal and high-vol coal for 2014. Negotiations are expected "to conclude within the next few weeks," it said.
As for guidance, Consol expects to sell 700,000 st of low-vol coal in Q4 at a firm average selling price of $92.27/st and 4.2 million st in 2013 at $95.34/st.
For high-vol coal, Consol expects to sell 500,000 st in Q4 at an average $61.31/st and 2.8 million st in 2013 at $63.27/st.
For thermal coal, Consol expects to sell 12.4 million st in Q4 at an average $58.19/st, and 49.9 million st in 2013 at an average $58.94/st.
Consol's natural gas business "showed unit margin expansion, quarter-over-quarter, as the average sales price was nearly unchanged, while unit costs were lower, mostly due to higher volumes" the company said.
"Overall natural gas production was up 17%, quarter-over-quarter, aided by the 72% growth in the Marcellus Shale component," it said. "The Gas Division is on track to meet its 2014 production guidance of 210-225 Bcfe. For 2015 and 2016, CONSOL has announced annual production guidance increases of between 25%-30%."
Consol reported a Q3 net loss of $64 million, or a loss of $0.28 per diluted share, compared with a loss of $11 million, or $0.05 per diluted share from the year-ago quarter.