Consolidated Energy 2nd Quarter Net Nearly Doubles on Asset Sale
07/26/2012| 12:18pm US/Eastern
--Consol Energy posts 2Q profit of $152.7 million, up from $77.4 million a year ago
--Asset sale masks effect of sinking coal, natural gas prices
--Coal sales fall 12%, company expects slight improvement in 3Q
(Updates throughout with executive comment in the fourth paragraph, Consol idling mines in the fifth paragraph, expectations of more asset sales in the seventh paragraph, coal and natural gas sales in the eighth and 10th paragraphs, details on one-time gains in the 12th paragraph, recent share price)
By Matt Day
Consol Energy Inc.'s (>> CONSOL Energy Inc.) second-quarter profit nearly doubled, with the energy company's sale of some properties helping blunt the effect of a slump in coal and natural gas prices.
U.S. coal producers have battled stiff competition from natural gas, the price of which has dipped to 10-year lows and pushed power producers to shift to the cleaner-burning fuel. Coal-mining companies have slashed production and laid off workers in response.
The market for steel-making coal also has sagged amid slowing global growth.
"There's a slowdown in demand for energy, not only in the United States but across the globe," Chief Executive J. Brett Harvey said on a conference call.
In June, the company idled its Fola operations in West Virginia, reducing production by roughly 800,000 tons this year and resulting in layoffs. The company said on Thursday that it had idled its Buchanan coal mine for a week this month to match supply to lower demand.
"Steel utilization rates are weak in Europe and Brazil, which are Consol's natural export markets," the company said in a statement. Global steel-making coal supply is currently outstripping demand, Consol said, helping to depress prices.
At the beginning of July, Consol agreed to sell some of its nonproducing northern Powder River Basin assets for $170 million in cash. Chief Financial Officer William Lyons said he expected the company to continue to dispose of noncore assets.
The company expects third-quarter coal sales of 14.9 million tons. Sales totaled 14.5 million tons in the second quarter, down 12% from a year ago.
Pennsylvania-based Consol, historically a coal-focused company, made a large bet on natural gas by spending $3.47 billion in 2010 to acquire Dominion Resources Inc.'s (D) natural gas business. Consol has since partnered with Hess Corp. (>> Hess Corp.) and Noble Energy Inc. (>> Noble Energy, Inc.) to develop parts of its gas holdings.
Low prices dragged net income from Consol's natural gas business to $800,000 in the second quarter, from $17.1 million during the same period in 2012. The company said it expects third-quarter natural gas production to total 40 billion to 42 billion cubic feet, up from about 37 bcf in the second quarter.
For the period ended June 30, Consol posted a profit of $152.7 million, or 67 cents a share, up from $77.4 million, or 34 cents a share, a year earlier.
The latest quarter included gains from its Powder River Basin asset sale and charges for reclamation at the Fola complex and expiration of some shallow gas leases. Excluding an after-tax gain of $82 million from those one-time items, second quarter profit was 31 cents a share.
Total revenue fell 8.4% to $1.45 billion.
Analysts polled by Thomson Reuters expected a per-share profit of 33 cents, on $1.31 billion in revenue.
Gross margin narrowed to 41.1% from 41.6%.
Shares rose 0.7% to $28.04. The stock is down 48% in the 12 months ended on Wednesday.
--Chelsea Stevenson contributed to this article.
Write to Matt Day at firstname.lastname@example.org
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