TORONTO (miningweekly.com) – The NYSE-listed stock of US fossil fuels producer Consol Energy on Tuesday morning lost as much as $0.62 apiece after it reported that its second-quarter loss nearly doubled as a result of once-off charges related to retiring some of its debt early.

For the three months ended June 30, Pittsburgh, Pennsylvania-based Consol reported a net loss of $25-million, or $0.11 a share, compared with a net loss of $13-million, or $0.05 a share, from the year-earlier period.

The second-quarter earnings were impacted by a $74.3-million charge related to extinguishing debt early, by buying all of the 8% senior notes that were due in 2017; a $3-million noncash charge associated with entering into a new senior secured credit facility and a noncash charge of $20.7-million associated with a pension settlement.

The company also recognised a gain of $30-million related to a coal-contract customer buyout for coal produced at its Bailey mine, in south-western Pennsylvania, which it would now remarket into core markets.

Consol reported a second-quarter adjusted net loss of $16.44-million, or $0.17 a share.

Revenue for the period was $937-million, up 13% when compared with total sales of 828-million in the same period a year earlier.

Wall Street analysts had, on average, expected adjusted earnings of $0.25 a share, derived from total sales of $923.28-million.

In a telephone conference call with analysts, president and CEO Nicholas DeIuliis emphasised the company’s strategic step change from predominantly being a coal producer to becoming a significant natural gas and oil producer.

Coal made up about 68% of the company’s total free cash flow in 2013. This year, it was expected to shrink to 47% and by 2016, coal was expected to account for only 37% of the company’s earnings before interest, taxes, depreciation and amortisation.

“Momentum continues to build within the E&P [exploration and production] segment. Utica results in Noble County are growing and supplementing the Marcellus output. Economies of scale are starting to appear and shareholders can expect a 30% production growth rate target over the next three years,” DeIuliis said.

Consol’s E&P division reported record output of 51.9-billion cubic-feet equivalent (Bcfe), an increase of 34% from the 38.6 Bcfe produced in the year-earlier quarter. Average realised prices of $4.44-million cubic-feet equivalent (Mcfe), when combined with declining unit costs of $3.44/Mcfe, resulted in a margin of $1/Mcfe. This was 45% higher than the $0.69/Mcfe margin achieved in the corresponding year-earlier period. Net income attributable to Consol shareholders from the E&P division was $15.5-million in the second quarter compared with a loss of $2.7-million.

Consol had recently lifted the lower end of its E&P production guidance from 215 Bcfe to 225 Bcfe, with the high-end being 235 Bcfe. To achieve the mid-point of the new range, the company would need to produce about 60 Bcfe in the third quarter and 70 Bcfe in the fourth quarter.

To this end, the company said it had a record number of Marcellus Shale wells due to be tied into line in the current quarter.

Consol’s coal division’s achieved output of 8.3-million tons, the midpoint of the guidance range of between 8.1-million tons and 8.5-million tons.

Weaker markets for metallurgical coal, though, decreased pricing for the company's low-volatile and high-volatile coals. Thermal coal pricing was also lower in the quarter compared with the year-earlier quarter. Higher thermal coal sales volumes, however, enabled the thermal coal business to generate more cash before capital expenditures and depreciation, depletion and amortisation (DD&A) than in the year-earlier quarter.

The thermal coal segment achieved cash production costs of $40.47/t in the period, lower than the $43.11/t cash production cost in the year-earlier quarter, despite geologic issues at the Enlow Fork mine and the change-out of a shearer at the new Harvey mine, which was renamed last month from the Bailey Mine Expansion in honour of recently elected executive chairperson Brett Harvey.

In total, Consol's active coal operations generated $179-million of cash before capital expenditures and DD&A, up from $4-million in the same quarter last year.

DeIuliis stressed that the company’s strategic focus remained on growing the net asset value (NAV) a share. “The latest example of that focus is our recently announced gas midstream master limited partnerships that we intend to have up and running in the next few months. Also at our recent analyst day, we discussed potential noncore asset sales of $1-billion over the next five years.

“All in all, pace of change at Consol is accelerating the point in time when we become net-free cash-flow positive, which creates additional opportunities for NAV a share accretion,” he said.

Consol also announced on Tuesday two $200-million tenders to buy back its 8.25% senior notes due in 2020 and its 5.875% senior notes due in 2022.

Consol’s NYSE-listed stock traded at $39.85 a share in the mid-morning session, having gained 6% in value since the start of the year.