TORONTO (miningweekly.com) – Despite oil prices having tested multiyear lows in recent months, which has seen many producers scrambling to cut costs in an effort to survive, US oil, gas and coal producer Consol Energy expects to continue expanding its exploration and production (E&P) division by 30% this year and again in 2016.

After once being one of the largest US coal producers, Consol has, in recent years, undergone a strategic step change from predominantly being a coal producer to becoming a significant natural gas and oil producer.

For the three months ended December, the Pittsburgh-based company on Friday reported record E&P output of 70.5-billion cubic-feet equivalent (Bcfe), an increase of 45% from the 48.5 Bcfe produced in the year-earlier quarter.

In the 12-month period, Consol produced 235.7 Bcfe, which was more than its goal of achieving 30% output growth over 2013, underpinning its expected yearly gas guidance growth of 30% to 2016.

The increased output was despite a midstream company having a fatality on one of their pipeline sites that led to safety concerns, prompting Consol to shut-in pads while undertaking a safety review. Consol estimated that the shut-ins accounted for 2.7 Bcfe worth of lost output in the quarter, but said operations were once more ramping-up in this area.

Marcellus Shale output volumes in the fourth quarter were 36.5 Bcfe, 88% higher than the 19.4 Bcfe produced a year earlier. Marcellus Shale costs were $2.83 for each million cubic-feet equivalent (Mcfe), which was a $0.18/Mcfe improvement from the fourth quarter of 2013 costs of $3.01/Mcfe. The company achieved all-in cash costs of $1.71/Mcfe in the Marcellus Shale.

Consol’s Utica Shale continued to become a bigger part of the production mix and, in the quarter, volumes were 7.1 Bcfe, up from 0.5 Bcfe in the year-earlier quarter. Utica Shale costs were $2.24/Mcfe in the period, which was a substantial improvement from the fourth quarter 2013.

"Despite the current commodity price environment, Consol continues to realise strong rates of return owing to our Tier 1 asset base, which allows us to drive efficiency improvements and continue to benefit from being a low-cost producer.

“Consol will not only continue to manage through these types of commodity cycles, but we will also capitalise on them as well as through share repurchase opportunities. Our strong balance sheet and substantial liquidity position will help fuel these types of opportunities,” president and CEO Nicholas DeIuliis said.

Following the trend of other oil and gas companies that had already reported their capital spending plans for the year, Consol would spend $1-billion on drilling for oil and gas this year, less than the $1.3-billion it spent last year.

Capital spending on its coal business for the year was expected to be about $220-million.

In Consol’s coal business, its Pennsylvania operations in the Bailey, Enlow Fork and Harvey mine complex, produced the expected level of eight-million tons during the quarter. Its Buchanan mine, in Virginia, which produced metallurgical coal for steelmaking, booked lower costs a ton year-on-year as it remained on a reduced schedule as a result of the weak international market.

Consol also reiterated plans to spin off the Pennsylvania mines that produced thermal coal into a publicly traded limited partnership, and the metallurgical coal operations into a subsidiary. The thermal spinoff was planned for the middle of the year and Consol expected to make the metallurgical coal subsidiary public near the end of the year.

The company reported net income of $74-million, or $0.32 a share, compared with a profit of $738-million, or $3.20 a share, which included income from discontinued operations of $591-million.

Adjusted earnings came in at $0.25 a share, beating Wall Street analyst expectations of $0.20 a share.

Revenue was $936-million, up from $825-million a year earlier, but lower than analyst expectations of $958.71-million.

Consol’s NYSE-listed stock hit an intraday high of $31.21 apiece around noon, before settling lower at about $29.64 in the afternoon session.