PITTSBURGH, April 16, 2012 /PRNewswire/ -- CONSOL Energy Inc. (NYSE: CNX), the leading diversified fuel producer in the Eastern U.S., is providing an operations update for the quarter ended March 31, 2012.
"CONSOL's mines and gas operations continued to run well during the quarter." commented J. Brett Harvey, chairman and chief executive officer, "We have stated many times that our top value is safety. In the first quarter we saw significant progress company-wide in our relentless drive towards Absolute Zero accidents. At the same time we were enjoying this progress, we also suffered a crushing setback when a member of the CONSOL family was fatally injured in January. This progress and setback the past quarter illustrate how far we have come on safety performance and how we are not content with where we are currently at. We can and we will do better."
CONSOL's Coal Division produced 15.7 million tons for the quarter, including 1.0 million tons of low-vol metallurgical coal from the company's Buchanan Mine.
CONSOL Energy's Gas Division produced 37.7 Bcf for the 2012 first quarter, or 13% more than the 33.5 Bcf produced in the 2011 first quarter, as adjusted for the subsequent sale of 2.4 Bcf of that quarter's production to Noble Energy and Antero Resources. During the quarter, CONSOL Energy drilled 22 Marcellus Shale wells, and placed four online. Additionally, Noble Energy drilled 5 Marcellus Shale wells in the liquids-rich area of the play. Those wells are currently being completed.
Second Quarter 2012 Forecasts
Coal: CONSOL Energy is suspending second quarter and calendar 2012 coal production forecasts until the idled longwalls at Blacksville and Buchanan mines have been re-started.
Gas: CONSOL Energy now expects its 2012 gas production to be approximately 157 - 159 Bcf (net to CONSOL). Second quarter 2012 gas production, net to CONSOL, is expected to be approximately 37 - 38 Bcf, or slightly less than the just-ended quarter. Production increases from wells turned line in the second quarter should be approximately offset by natural field declines, as well as lower coalbed methane (CBM) volumes, due to the temporary idling of the longwall at Buchanan Mine. The latter item reduced first quarter 2012 production by nearly 0.4 Bcf in March.
Coal Division Operations
In March, CONSOL Energy began production of coal from the re-started Amonate Mining Complex. With permits in hand, CONSOL is currently producing coal from three mines: the Squire Jim 2, the Squire Jim 4, and the Pocahontas 3. The complex is now expected to produce about 300,000 tons of mid-vol metallurgical coal in 2012. This reduction from prior guidance of 400,000 tons was due to delays in receiving state and federal plan approvals as well as initial yields, which have been lower than expected.
At the Blacksville Mine, the idling of the longwall has enabled the company to shift labor to complete a major sealing project. Approximately one-third of the old workings have now been sealed, thereby increasing safety, reducing ventilation requirements, and eliminating the need to maintain some high cost areas. Since the continuous miner sections continued to operate after the longwall was idled, the number of lead days has increased by a least 20. This means that when the longwall is re-started, the mine will be able to quickly respond to market needs.
Similarly at the Buchanan Mine, the continuous miner sections have continued to run while the longwall is idle, which have also added at least another 20 days of lead time.
CONSOL's total coal inventory increased during the quarter by 0.4 million tons to 2.2 million tons as of March 31, 2012. Thermal coal inventory increased by 0.4 million tons during the quarter, as sales lagged production. Low-vol Buchanan inventory was unchanged from December 31, 2011, at 0.2 million tons.
Gas Division Operations
Central PA: During the first quarter, CONSOL Energy drilled eight Marcellus wells, including four from the Gaut pad, one from the DeArmitt pad and three from the Bowers Unit. Gaut and DeArmitt are in CONSOL's development field in northwestern Westmoreland County, PA. Bowers is the first horizontal development for CONSOL in Jefferson County, PA. The eight Marcellus wells from the Aikens pad, which were drilled in late 2011, are currently being completed. Full production from the Aikens pad is expected by June 1, 2012.
In Central Pennsylvania, CONSOL Energy currently has one rig drilling.
Southwest PA: CONSOL continues its full-scale development drilling at several pads in Greene County. During the first quarter, CONSOL drilled 10 wells and brought four wells online at several pads with (perf-to-perf) laterals averaging 3,445 feet. These wells came on line in the last week in March, so EURs have yet to be calculated and had minimal impact to production in the first quarter. One well, the Morris 9-D, had peak production on April 9 of 10.5 MMcf.
In Southwest Pennsylvania, CONSOL currently has three rigs drilling.
Northern WV: CONSOL Energy drilled four wells during the quarter. Three were Alton wells in Upshur County and one was a Phillipi well in Barbour County. These wells will be completed in the second quarter. CONSOL Energy currently has one rig drilling in Northern West Virginia.
Noble Energy-Operated: Noble Energy drilled five wells on the SHL-3 pad in Marshall County, W. Va. None has been turned online. Noble Energy has one rig drilling in the liquids-rich area of the Marcellus Shale.
Ohio Utica: In the Utica Shale Joint Venture with Hess Corporation, CONSOL Energy has completed its first horizontal well in the western portion of Tuscarawas County, Ohio. The company continues to evaluate the flowback from the well and is conducting additional testing before communicating results. A drilling rig will shortly be moving to the joint venture acreage in Noble County, where CONSOL will be drilling its first horizontal well in that county. Hess Corporation did not drill any of its 6 expected 2012 JV wells in the first quarter.
CONSOL Energy will report additional operational and financial results for the quarter ended March 31, 2012 at 7:00 a.m. ET on Thursday, April 26, 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.
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; 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 and joint ventures that we recently have completed or entered into 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 including joint venture partners paying anticipated carry obligations; 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 the 2011 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.