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Consol issues operating report amid speculation on company's future

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A few days after issuing a statement addressing rumors of a possible corporate reorganization, Consol Energy on Oct. 15 issued its third-quarter operating report.

The company said gas production is up and low-vol coal inventories are declining while thermal coal inventories are increasing.

Consol said its pre-tax income for the quarter could be "modestly positive," but it expects net income to be a loss for the quarter. Consol will release its earnings report at 7 a.m. on Oct. 31.

Consol's Gas Division produced 46.1 billion cubic feet equivalent (Bcfe) during the third quarter, or 17 percent more than the 39.5 Bcfe produced in the 2012 third quarter, the operating report said. Third quarter production guidance had been 43-45 Bcfe. The 2013 third quarter production included, net to Consol, 491 MMcf per day of natural gas, 397 barrels per day of oil/condensates and 1,340 barrels per day of natural gas liquids (NGLs).

Consol's gas production growth is beginning to accelerate as it and its Marcellus Shale partner expand the rig count, J. Brett Harvey, Consol chairman and CEO, said in the operations report. Consol and Noble Energy have a record eight rigs drilling in the Marcellus Shale on their joint venture acreage, and they expect to operate at least that many rigs next year, Harvey said.

Consol's Coal Division produced 14.5 million tons in the third quarter. As of Sept. 30, Consol's total coal inventory increased by 158,000 tons to 1,075,000 tons. Thermal coal inventory increased by 198,000 tons to 971,000 tons, while low-vol coal inventory decreased by 40,000 tons, to 104,000 tons.

During the third quarter, Consol Energy drilled 15 horizontal shale wells — 12 in the Marcellus Shale and three in the Utica Shale. Consol completed 21 Marcellus Shale wells and three Utica Shale wells in the third quarter. Also, Consol turned in line 22 Marcellus Shale wells in the third quarter.

In the dry gas areas, Consol drilled five wells in northern West Virginia during the third quarter — one each in Upshur and Barbour counties, and it drilled the final three of six wells on a pad in Barbour County. Consol has one horizontal rig operating in Upshur County and expects to drill three additional wells, which is consistent with previous guidance provided last quarter to drill 11 wells in 2013.

In the wet gas areas, Noble Energy drilled 15 wells: six in Marshall County, three in Doddridge County and six in Washington County.

On Oct. 11, Consol issued a short statement "to address recent speculation regarding possible corporate transactions involving the Company."

"As we have stated previously, we believe the financial markets are not recognizing the full value of our world-class assets," the statement said.

"In our second quarter earnings release issued July 25, 2013, CONSOL Energy stated that we are evaluating our overall corporate structure to consider different alternatives to unlock additional value for our shareholders. Although it is CONSOL Energy's long-standing policy not to comment on market rumors or speculation, CONSOL Energy confirms that the evaluation process regarding our corporate structure continues and all options are being considered. There can be no assurance that any particular option will be pursued.  If and when there is something to announce, we will communicate with all stakeholders, including our shareholders, our employees and the communities involved."