Q3 Losses Send CONSOL Energy (CNX) Lower, but Shale Gas Shows Promise

Michael Teague  |

CONSOL Energy Inc. (CNX) , the largest industrial miner of metals and miners in the US, released a mixed third-quarter earnings report ahead of Tuesday’s opening bell that saw shares trading lower by midday.

The $8.7 billion civil-war era company reported a loss for the third quarter of $64 million, or $0.28 per diluted share on revenue of $1.23 billion, a significant retrogression from losses sustained during the prior-year period’s loss of $11 million, or $0.05 per adjusted share on revenue of $1.16 billion. Expectations had been for earnings on a per-share basis of $0.03, with revenue at $1.27 billion.

The market reacted by pulling the company’s stock some 1.7 percent lower, to about $26.80 per share as a result of the miss. Furthermore, mining companies, and in particular those who dig coal out of the earth have been having a rough go of late as the regulatory environment for the carbon-heavy energy source becomes more adverse on a seemingly constant basis.

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But for all the talk about how bad things have been for coal companies, in the case of CONSOL at least, there are some unheralded bright spots to today’s release.

In terms of the company’s coal segment, benefits were seen in a decrease in the cost per ton sold from the prior year period’s $55.84 to the recently-ended quarter’s $50.46, largely a result of greater sales volume and improvement to the efficiency of on-the-ground mining operations.

The more significant development by far are the company’s efforts to expand its business into the Marcellus Shale. The company explained it in its statement by saying that it “is not only on track to meet its 2014 overall gas production guidance but is also on track to more than double its Marcellus Shale production in 2014, compared to 2013."

This appears to be a reasonable expectation. CONSOL posted a sequential 17 percent increase in natural gas production, largely the result of a 72 percent increase of its interests in the Marcellus Shale. The company said that it was not only on track to meet production targets for 2014, but also increased guidance for 2015 natgas production by 25-30 percent.

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