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Press release from PR Newswire

CONSOL Energy Announces Operations Update

Friday, January 24, 2014

CONSOL Energy Announces Operations Update

06:45 EST Friday, January 24, 2014

Gas Division Produces Record 48.5 Bcfe in Quarter;
Marcellus Production Volumes Increase 56% from Year-Earlier Quarter;
BMX Mine On-Track to Begin Operations in Q1 2014

PITTSBURGH, Jan. 24, 2014 /PRNewswire/ -- CONSOL Energy Inc. (NYSE: CNX) is providing an operations update for the quarter ended December 31, 2013.

(Logo:  http://photos.prnewswire.com/prnh/20120416/NE87957LOGO )

"Despite the potential for distractions during a quarter with a major asset transaction, CONSOL Energy's gas operations and mines performed with distinction," commented J. Brett Harvey, chairman and CEO. "In natural gas, we again set quarterly and annual production records, while positioning ourselves to accelerate production growth in 2014. Our culture of continuous improvement yielded improved completion techniques in the Marcellus Shale, as well as substantial improvements for drilling costs per lateral foot, on an annual basis. Our coal mines ran well in the quarter as we also work to complete, in early 2014, three major projects, which are detailed below."

In our gas business, our goals for 2013 included further reducing drilling costs per lateral foot drilled in both the Marcellus and Utica Shale, increasing completion effectiveness, streamlining our drill ready processes prior to the arrival of the drilling rig that will allow for increased future activity levels, and increasing cooperation and communication with our JV partners in the Marcellus and Utica shales to facilitate increased future drilling and completion activities in both projects. 

On the drilling side, CONSOL satisfied its 2013 goal of reducing costs per lateral foot drilled by identifying and minimizing the relative proportion of nonproductive time such as mobilizing rigs, running casing, and waiting on cement. In 2013, the cost per lateral foot was $378, compared to the previous year of $529 per lateral foot. For all-in drilling and completion (D&C) costs for a 6,000 foot lateral, the total cost in 2013 was approximately $6.7 million per well, or $1.1 million per 1,000 feet, which includes the cost of wells drilled utilizing short stage lengths (SSL) and reduced cluster spacing (RCS). To illustrate the value of longer laterals, the all-in D&C costs of a 4,800 foot lateral would increase to $1.3 million per 1,000 feet, which excludes any costs associated with SSL and RCS. Utilization of SSL and RCS increases well costs by approximately $1.2 million per well, or $240,000 per 1,000 feet.  

CONSOL's Gas Division produced 48.5 Bcfe for the 2013 fourth quarter, or 16% more than the 41.8 Bcfe produced in the 2012 fourth quarter. Annual 2013 gas production was 172.4 Bcfe (net to CONSOL).

CONSOL's Coal Division produced 7.1 million tons for the fourth quarter of 2013, including 1.2 million tons of low-vol coking coal from the company's Buchanan Mine. This was greater than the 6.6 million tons, including 0.7 million tons from Buchanan, in the fourth quarter of 2012. Annual 2013 coal production was 28.5 million tons, including 4.7 million tons from Buchanan. Annual 2012 coal production was 27.2 million tons (all coal tons were restated to reflect the sale of five mines in the fourth quarter).

During the fourth quarter of 2013, CONSOL's total coal inventory remained unchanged at 0.6 million tons as of December 31, 2013. Thermal coal inventory decreased by 0.1 million tons to 0.4 million tons during the quarter, as sales exceeded production. Low-vol Buchanan inventory increased by 0.1 million tons to 0.2 million tons during the quarter. 

2014 Forecasts

Gas: CONSOL Energy expects its 2014 gas production to range between 215 ? 235 Bcfe (net to CONSOL). First quarter 2014 gas production, net to CONSOL, is expected to be approximately 47 ? 49 Bcfe, or relatively flat from the 48.5 Bcfe produced in the fourth quarter of 2013, as a result of seasonal factors limiting wells turned into line.

CONSOL's Marcellus Shale segment is expected to produce between 107 ? 109 Bcfe in 2014, or 87% more than the 57.8 Bcfe produced in 2013.  

Coal: CONSOL Energy expects first quarter 2014 total coal production to be between 7.2 ? 7.6 million tons. Annual 2014 total coal production guidance is 30.1 ? 32.1 million tons. Buchanan Mine's first quarter production is expected to be between 1.1 ? 1.2 million tons, while annual production guidance is now estimated at 4.2 ? 4.7 million tons.

Gas Division Operations

For 2013, the Gas Division worked the entire year without a lost-time incident, continuing its streak dating back to 1994. In the area of compliance, CONSOL's Gas Division saw violations increase by over 21%, from 38 to 46 compared to the previous year.

During the fourth quarter, CONSOL Energy drilled 13 Marcellus Shale wells. CONSOL completed nine Marcellus Shale wells and three Utica Shale wells in the fourth quarter. Also, CONSOL turned in line 13 Marcellus Shale and two Utica Shale wells in the fourth quarter. 

In 2013, CONSOL Energy drilled 55 horizontal shale wells: 46 Marcellus Shale and nine Utica Shale wells. CONSOL completed 59 Marcellus Shale wells and 10 Utica Shale wells in the year. Also, CONSOL turned in line 52 Marcellus Shale and two Utica Shale wells. 

Marcellus Shale Dry Gas:

Towards its 2013 goal of increased completion effectiveness, CONSOL continued to utilize enhanced recovery techniques through SSL and RCS, in Q4 2013, and total completion stages for 2013 increased by 58% compared to the previous year. The early results of these enhanced recovery techniques in Southwest Pa. have been very promising. In the fourth quarter of 2013, initial 24-hour production rates were as high as 18 MMcf/d and averaged 12 MMcf/d for the wells brought online.  Also, four of these wells averaged over 10 MMcf/d for 30 days. The wells completed in this manner have shown initial production rates improving by as much as 40%, which the company believes will translate into potential increases to well EURs of 15%-20%. We will provide more details in our year-end 2013 reserve report, which we plan to issue around February 7th. We are anxious to apply these enhanced recovery techniques as we begin development on our Pittsburgh Airport lease and our Dominion Transmission storage field farm-in during 2014. 

Southwest Pa.: During the fourth quarter, CONSOL drilled six wells in Washington County. In 2013, CONSOL drilled 26 wells in Southwest Pa.

CONSOL Energy currently has one horizontal rig operating and expects to add a second rig during the year. In 2014, CONSOL plans to drill 44 wells in Greene and Washington counties with an expected average drilled lateral length of 6,600 feet.

CONSOL's first Upper Devonian well, the NV 39F, which was drilled in the Burkett Shale and turned in line in June 2013, continues to demonstrate a shallow decline rate and an EUR in the range of 5-6 Bcfe. CONSOL expects to drill five additional Burkett Shale wells in 2014, as well as one Rhinestreet Shale formation.

Central Pa.: During the fourth quarter, CONSOL drilled five wells in Westmoreland County. In 2013, CONSOL drilled 10 wells in Central Pa.

CONSOL Energy currently has one horizontal rig operating. In 2014, CONSOL plans to drill nine wells in the Mamont Field of Westmoreland County with an expected average drilled lateral length of 6,700 feet. 

Northern W.Va.: During the fourth quarter, CONSOL drilled two wells in Upshur County. In 2013, CONSOL drilled 10 wells in Northern W.Va.

CONSOL Energy currently has one horizontal rig operating. In 2014, CONSOL plans to drill 23 wells in Barbour County with an expected average lateral length of 6,200 feet.

Marcellus Shale Wet Gas:

In the wet gas portion of the Marcellus Shale, in 2013, our joint venture partner drilled, completed, and turned in line 71, 41, and 35 wells, respectively. 

In the fourth quarter 2013, our JV partner turned in line the six-well SHL 17 pad, which has reached 37 MMcfe/d during flowback.

Our JV partner is currently operating five horizontal rigs in Northern W.Va. In 2014, they expect to drill 85 wells in the wet region of the Marcellus Shale.

Ohio Utica Shale (CONSOL-operated):

In 2013, as part of the Utica Shale joint venture, CONSOL Energy drilled nine wells: three wells on the NBL 11 pad with an average lateral length of 5,702 feet, three wells on the NBL 33 pad with an average lateral length of 5,476 feet, and three wells on the NBL 19 pad with an average lateral length of 9,893 feet. The wells ranged in lateral length from 4,834 to 10,360 feet and were all located in Noble County.

CONSOL completed 10 wells in 2013 and expects to turn in line nine wells towards the end of the first quarter of 2014.

CONSOL Energy is not currently operating a horizontal rig in the Utica Shale but plans to add a rig late in the first quarter. In 2014, CONSOL plans to drill 14 wells: 13 Utica Shale wells and one Marcellus Shale well, which is located in Ohio. Of the 14 wells, 12 Utica Shale wells will be located in Noble County, and one Utica and Marcellus wells will be located in Monroe County. 

Ohio Utica Shale:

In 2013, our joint venture partner drilled, completed, and turned in line 15, eight, and four wells, respectively. They are currently operating three horizontal rigs in eastern Ohio. 

Coal Division Operations

For 2013, CONSOL's Coal Division saw safety exceptions increase by 21%, from 134 to 162. In the area of environmental compliance, CONSOL's Coal Division saw violations decrease by over 41%, from 79 to 46, compared to the previous year. Also, during the same period, CONSOL had a 14% reduction in total MSHA violations with all mines and a 17% reduction in total MSHA violations for the retained coal mines.

CONSOL's Coal Division expects to complete three projects in the first quarter of 2014: the BMX Mine and the Bailey Preparation Plant upgrades, the Enlow Fork Overland Conveyor Belt, and the Buchanan Mine Contrary Service Hoist.

The BMX Mine is on schedule to begin coal production in mid-March 2014. Also, the Bailey Preparation Plant upgrades, which will support these additional BMX Mine tons, are also on track to begin operations during the same period.

The Enlow Fork Overland Conveyor Belt is expected to begin operations by the end of January 2014. This will allow the mine to continue sealing the abandoned areas of the mine, which will improve unit costs, productivity, and reduce risk for employees associated with the maintenance of those areas of the mine. The previously mined, and abandoned, F district area of the mine was sealed in December over the shutdown period.

CONSOL expects the Buchanan Mine Contrary Service Hoist project to begin operations by the end of January 2014. This project upgraded the former entrance to the mine to transport equipment and supplies closer to the face, which increases efficiency by cutting down approximately 15 miles, round-trip, of haulage track. The total cost of the projected is expected to be approximately $24 million.  

Earnings Release Information

CONSOL Energy will report additional operational and financial results for the quarter ended December 31, 2013 at 7:00 a.m. ET on Friday, January 31, 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.

Cautionary 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 with respect to our capital investment in 2014: deterioration in economic conditions in any of the industries in which our customers operate or a worldwide financial downturn; an extended decline in prices we receive for our coal, gas and natural gas liquids; the disruption of rail, barge, gathering, processing and transportation facilities and other systems that deliver our coal and gas to market; 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; 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; decreases in the availability of, or increases in, the price of commodities and services used in our mining and gas operations; 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 outcomes of various legal proceedings, which are more fully described in our reports filed under the Securities Exchange Act of 1934; actions taken by our joint venture partners in existing joint ventures and acquisitions or joint ventures that we may enter into in the future; 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; provisions of our debt agreements; failure by Murray Energy Corporation to satisfy the liabilities it assumed from us as well as to perform its obligations under various agreements;  and other factors discussed in the 2012 Form 10-K under "Risk Factors," as updated by any subsequent Form 10-Qs, which are on file at the Securities and Exchange Commission.

The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible oil and gas reserves that a company anticipates as of a given date to be economically and legally producible and deliverable by application of development projects to known accumulations. We may use certain terms in this press release, such as EUR (estimated ultimate recovery), unproved reserves and total resource potential, that the SEC's rules strictly prohibit us from including in filings with the SEC. These measures are by their nature more speculative than estimates of reserves prepared in accordance with SEC definitions and guidelines and accordingly are less certain. We also note that the SEC strictly prohibits us from aggregating proved, probable and possible reserves in filings with the SEC due to the different levels of certainty associated with each reserve category.

SOURCE CONSOL Energy Inc.

For further information: Investor: Dan Zajdel at (724) 485-4169, Tyler Lewis at (724) 485-3157, or Media: Kate O'Donovan at (724) 485-3097, or Brian Aiello at (724) 485-3078

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