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Press release from PR Newswire

CONSOL Energy Announces Operations Update; Coal Division Produces 15.4 Million tons, Increases Guidance; Gas Division Produces Record 37.5 Bcf, up 18% from Year-Earlier Quarter; Gas Division Issues Contracts for Two Additional Flex Rigs

Thursday, July 14, 2011

CONSOL Energy Announces Operations Update; Coal Division Produces 15.4 Million tons, Increases Guidance; Gas Division Produces Record 37.5 Bcf, up 18% from Year-Earlier Quarter; Gas Division Issues Contracts for Two Additional Flex Rigs08:00 EDT Thursday, July 14, 2011PITTSBURGH, July 14, 2011 /PRNewswire/ -- CONSOL Energy Inc. (NYSE: CNX), the leading diversified fuel producer in the Eastern U.S., is providing an operational update for the quarter ended June 30, 2011.CONSOL Energy's Coal Division reports total coal production of 15.4 million tons for the quarter, including 1.4 million tons of low-vol metallurgical coal produced by the company's Buchanan Mine."CONSOL's mines ran very well during the quarter," commented J. Brett Harvey, chairman and chief executive officer. "Buchanan Mine ran especially well, considering that it made a longwall move during the quarter. Our Shoemaker Mine also set daily and monthly production records."As a result of the strong quarter, CONSOL Energy is increasing its total annual coal production guidance from 60-62 million tons to between 62.0 and 63.0 million tons, with third quarter production between 14.4 and 14.8 million tons.  This quarterly 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. The third quarter usually has the heaviest miners' vacation schedule.Annual production guidance of low-vol metallurgical coal is now expected to be 5.0 million tons for 2011. This is an increase from the previous guidance of 4.5 million tons.Thermal coal inventories fell by 0.9 million tons to 1.6 million tons during the quarter due to the higher-than-expected sales. Low-vol Buchanan inventory was unchanged from March 31, 2011, at 0.2 million tons.CONSOL's Gas Division produced a record 37.5 Bcf for the quarter, or nearly 18% more than the 31.9 Bcf produced in the year-earlier quarter. The company re-affirms its 2011 production guidance of 150-160 Bcf.For drilling in the Marcellus and Utica shales, CONSOL Energy has contracted for two additional flex rigs, which will arrive by October 1. As of that date, the company expects to have a total of six rigs, with one rig drilling in Central Pennsylvania, three in Southwestern Pennsylvania, one in Northern West Virginia, and one full-time in the Utica Shale. The company believes that with its continued successes in the Marcellus Shale, coupled with its low cost structure, it can generate attractive returns from an expanded drilling program, even at current prices.In the first half of 2011, CONSOL Energy drilled 40 wells in the Marcellus Shale, including 24 in Southwest Pennsylvania, ten in Central Pennsylvania, and six in Northern West Virginia. Assuming the new rigs arrive as scheduled, the company now expects to drill about 85 wells in 2011. In Central Pennsylvania, CONSOL has moved to full-scale development, after the initial successes at the DeArmitt pad. All ten horizontal wells drilled in Central Pennsylvania in the second quarter were drilled on the Hutchinson pad in northwestern Westmoreland County. On this single pad, CONSOL drilled laterals totaling 41,647 feet, with the longest lateral being 5,517 feet. This pad highlights the competitive advantage that CONSOL has in the Marcellus Shale. Because the company has relatively little acreage expiring, it can efficiently drill wells on large pads, instead of drilling to hold acreage. Larger pads, the company believes, should result in lower unit operating costs, while minimizing the number of permits needed for stream crossings. The Hutchinson pad has now received all necessary stream crossing permits for the associated gathering lines. The wells will be hydraulically fractured in August. First production from this pad is expected to occur around Labor Day.In Southwestern Pennsylvania, CONSOL continues its full-scale development drilling at several Nineveh pads in Greene County.In Northern West Virginia, CONSOL drilled its first pad, the Alton pad, in Upshur County. CONSOL's objective was to test the southeastern extremity of its Marcellus holdings, under the theory that if these wells were commercial, much of the acreage between Upshur County and Greene County (Pa.) was also likely to be commercial. The three wells on this pad had combined laterals of 12,000 feet, and a total of 34 frac stages. The three wells produced at a peak 24-hour rate of 5.3 MMcf, and had a 30-day production rate of 4.7 MMcf. The results were in line with company expectations, given that the production is flowing into an 840-pound gathering line. As compression is added next week, the company expects to see higher production rates.The rig operating in Northern West Virginia has now moved to Barbour County, West Virginia, where drilling has begun at the Phillipi pad. CONSOL Energy will report additional operational and financial results for the quarter ended June 30 at 7:00 a.m. ET on Thursday, July 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: Investor Contacts: Brandon Elliott, +1-724-485-4526, Dan Zajdel +1-724-485-4169