TORONTO (miningweekly.com) – The NYSE-listed stock of diversified energy producer Consol Energy lost as much as 28% on Tuesday after the company reported third-quarter earnings that missed analyst forecasts by a wide margin.
Despite cuts to retiree benefits and an asset sale boosting Consol’s bottom line for the three months ended September 30 to a net income of $119-million, or $0.52 a share, compared with a loss of $1.6-million, or $0.01 a share, a year earlier, the adjusted loss was $64-million, or $0.28 a share – $0.23 a share worse than what Wall Street analysts had expected.
Revenue fell 8% year-on-year to $814-million, down from $885-million in the third quarter of 2014, as a collapse of the global coal market and multiyear low natural gas prices bit into margins. Consol reported a $0.28c loss for every 1 000 cubic feet of gas it produced during the quarter.
While margins for every ton of coal produced at its Pennsylvania operations improved by about $2.32 to $16.61/t, Consol’s Buchanan metallurgical coal mine, in Virginia, however, produced at a loss of $2/t.
"During the quarter, we beat production targets, locked in a significant percentage of our revenues for 2016 with additional gas hedges and multiyear coal contracts, significantly reduced operating costs, corporate overhead and legacy liabilities, and accelerated our asset sale monetisation programme. These steps provide increased confidence in our ability to achieve our free cash flow base plan … and we are hard at work with multiple processes under way to monetise additional assets this year and into 2016. Expected proceeds will go towards reducing debt to help accelerate the separation of our coal and exploration and production (E&P) divisions,” president and CEO Nicholas DeIuliis commented.
Consol had in June spun-out its thermal coal assets into CNX Coal Resources (CNXC), which operated the Pennsylvania thermal coal complex. CNXC had on Monday reported earnings of $14.7-million.
Consol maintained its 2016 capital expenditure budget at between $400-million and $500-million, which included $50-million for midstream capital. Fourth-quarter E&P capital was expected to decline significantly, compared with the previous three quarters, owing to the company laying down all operated rigs late within the third quarter. Consol had taken a decision not to drill any new wells until 2017.
By market close, the company's stock had fallen 21.22% to $6.98 a share, having dropped 74% since the start of the year.