Press release from PR Newswire
CONSOL Energy Announces Operations Update; Coal Division Produces 17.2 million tons, Guidance Increased; Gas Division Reports Marcellus Shale Results in Westmoreland County, Pa.
Wednesday, April 13, 2011
CONSOL Energy Announces Operations Update; Coal Division Produces 17.2 million tons, Guidance Increased; Gas Division Reports Marcellus Shale Results in Westmoreland County, Pa.09:11 EDT Wednesday, April 13, 2011PITTSBURGH, April 13, 2011 /PRNewswire/ -- CONSOL Energy Inc. (NYSE: CNX), the leading diversified fuel producer in the Eastern U.S., reports an operations update for the quarter ended March 31, 2011.CONSOL Energy's Coal Division reports total coal production of 17.2 million tons for the quarter, including 1.5 million tons of low-vol metallurgical coal produced by the company's Buchanan Mine. The total production was the highest of any quarter since the fourth quarter of 2008, when the company had several more mines in operation."CONSOL's mines ran exceptionally well during the quarter," commented J. Brett Harvey, chairman and chief executive officer.As a result of the very good quarter, CONSOL Energy is increasing its annual coal production guidance from 59-61 million tons to between 60 and 62 million tons, with second quarter production between 14.75 and 15.25 million tons. This guidance reflects the normal seasonal production pattern, which would result in 2011's first and fourth quarter production being higher than the second and third quarters. Second quarter production is also expected to be affected by six longwall moves.Thermal coal inventories rose by 0.6 million tons to 2.5 million tons during the quarter due to the higher-than-expected production. Low-vol Buchanan inventory was unchanged from December 31, 2010, at 0.2 million tons.In the Marcellus Shale, CONSOL drilled 13 horizontal wells for the quarter, putting it slightly ahead of schedule for the 70 wells to be drilled in 2011. Seven wells were drilled in Southwest Pennsylvania, four in Central Pennsylvania, and two in Northern West Virginia.With additional drilling in early April, CONSOL has drilled 17 wells in 2011, with a total Marcellus lateral footage of over 60,000 feet. This compares to a total lateral footage of 78,000 feet for all of 2010. The drilling efficiency continues to increase in all three operating areas. Drilling days from kick-off point to total depth is averaging fewer than 10 days. The company has now received its complement of four walking rigs, which it plans to deploy in the Marcellus and Utica shales for the remainder of the year. Subsequent to the close of the quarter, CONSOL hydraulically fractured three horizontal wells on its DeArmitt pad, in Westmoreland County, Pa. These are the first wells to be fraced on the former Dominion property. The first two of those wells, the 1C and the 1A are flowing at a combined rate of over 15 MMcf per day. The DeArmitt 1C has 4,200 feet of lateral, and had 14 successful frac stages, with 300-foot spacing. The DeArmitt 1A has 3,400 feet of lateral, and had 10 successful frac stages, with 300-foot spacing. "It is very gratifying," continued Mr. Harvey, "to see that the first two wells drilled on the acquired Dominion property appear to be very substantial. Twelve months ago we had one operating area in the Marcellus: Southwestern Pennsylvania. That area, encompassing Greene and Washington counties, has basically been de-risked. We acquired two new operating areas: Central Pennsylvania and Northern West Virginia. The DeArmitt results and the results of others in the area significantly de-risk the acreage in and around Indiana County, Pa. We will have more data on our third area as we move through the second quarter."CONSOL Energy's Gas Division achieved record quarterly gas production of 35.9 Bcf for the quarter ended March 31, 2011. The company re-affirms its 2011 production guidance of 150-160 Bcf.CONSOL Energy will report additional operational and financial results for the quarter ended March 31 at 7:00 a.m. ET on Thursday, April 28, followed by a conference call at 10:00 a.m. ET. The call can be accessed at the investor relations section of the company's web site, at www.consolenergy.com.Forward-Looking Statements Various statements in this release, including those that express a belief, expectation or intention, may be considered forward-looking statements (as defined in Section 21E of the Exchange Act) that involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. When we use the words "believe," "intend," "expect," "may," "should," "anticipate," "could," "estimate," "plan," "predict," "project," or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this press release, if any, speak only as of the date of this press release; we disclaim any obligation to update these statements. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following: deterioration in economic conditions in any of the industries in which our customers operate, or sustained uncertainty in financial markets cause conditions we cannot predict; an extended decline in prices we receive for our coal and gas affecting our operating results and cash flows; our customers extending existing contracts or entering into new long-term contracts for coal; our reliance on major customers; our inability to collect payments from customers if their creditworthiness declines; the disruption of rail, barge, gathering, processing and transportation facilities and other systems that deliver our coal and gas to market; a loss of our competitive position because of the competitive nature of the coal and gas industries, or a loss of our competitive position because of overcapacity in these industries impairing our profitability; our ability to negotiate a new agreement with the United Mine Workers' of America and our inability to maintain satisfactory labor relations; coal users switching to other fuels in order to comply with various environmental standards related to coal combustion emissions; the impact of potential, as well as any adopted regulations relating to greenhouse gas emissions on the demand for coal and natural gas, as well as the impact of any adopted regulations on our coal mining operations due to the venting of coalbed methane which occurs during mining; foreign currency fluctuations could adversely affect the competitiveness of our coal abroad; the risks inherent in coal and gas operations being subject to unexpected disruptions, including geological conditions, equipment failure, timing of completion of significant construction or repair of equipment, fires, explosions, accidents and weather conditions which could impact financial results; our focus on new gas development projects and exploration for gas in areas where we have little or no proven gas reserves; decreases in the availability of, or increases in, the price of commodities and services used in our mining and gas operations, as well as our exposure under "take or pay" contracts we entered into with well service providers to obtain services of which if not used could impact our cost of production; obtaining and renewing governmental permits and approvals for our coal and gas operations; the effects of government regulation on the discharge into the water or air, and the disposal and clean-up of, hazardous substances and wastes generated during our coal and gas operations; the effects of stringent federal and state employee health and safety regulations, including the ability of regulators to shut down a mine or well; the potential for liabilities arising from environmental contamination or alleged environmental contamination in connection with our past or current coal and gas operations; the effects of mine closing, reclamation, gas well closing and certain other liabilities; uncertainties in estimating our economically recoverable coal and gas reserves; costs associated with perfecting title for coal or gas rights on some of our properties; the outcomes of various legal proceedings, which are more fully described in our reports filed under the Securities Exchange Act of 1934; the impacts of various asbestos litigation claims; increased exposure to employee related long-term liabilities; increased exposure to multi-employer pension plan liabilities; minimum funding requirements by the Pension Protection Act of 2006 (the Pension Act) coupled with the significant investment and plan asset losses suffered during the recent economic decline has exposed us to making additional required cash contributions to fund the pension benefit plans which we sponsor and the multi-employer pension benefit plans in which we participate; lump sum payments made to retiring salaried employees pursuant to our defined benefit pension plan exceeding total service and interest cost in a plan year; acquisitions that we recently have completed or may make in the future including the accuracy of our assessment of the acquired businesses and their risks, achieving any anticipated synergies, integrating the acquisitions and unanticipated changes that could affect assumptions we may have made and divestitures we anticipate may not occur or produce anticipated proceeds; the anti-takeover effects of our rights plan could prevent a change of control; increased exposure on our financial performance due to the degree we are leveraged; replacing our natural gas reserves, which if not replaced, will cause our gas reserves and gas production to decline; our ability to acquire water supplies needed for gas drilling, or our ability to dispose of water used or removed from strata in connection with our gas operations at a reasonable cost and within applicable environmental rules; our hedging activities may prevent us from benefiting from price increases and may expose us to other risks; and other factors discussed in this 2010 Form 10-K under "Risk Factors," as updated by any subsequent Form 10-Qs, which are on file at the Securities and Exchange Commission.SOURCE CONSOL Energy Inc.For further information: Brandon Elliott, +1-724-485-4526, or Dan Zajdel, +1-724-485-4169