CONSOL Energy consoles its customers with coal and natural gas. CONSOL is one of the US's largest coal mining companies, along with Peabody Energy and Arch Coal. In 2012 the company had some 4.2 billion tons of proved and probable reserves, mainly in northern and central Appalachia and the Illinois Basin. CONSOL primarily mines high BTU coal, which burns cleaner than lower grades. Customers include electric utilities and steel mills. CONSOL delivers coal using its own railroad cars, terminals, and barges (it maintains a fleet of 21 tow vessels and 600 barges). The company also engages in natural gas exploration and production through CNX Gas.
CONSOL has operations in the US (Kentucky, Ohio, Pennsylvania, Utah, Virginia, and West Virginia) and Canada.
The company mines primarily bituminous coal at 11 mining complexes in the US. In 2012, 96% of CONSOL's coal production came from underground mines and 4% from surface mines.
It is also engaged in natural gas (primarily coalbed methane) production in Appalachia through CNX Gas. In 2012 it controlled 4 trillion cu. ft. of net proved natural gas reserves of gas, and operated more than 15,000 net wells.
In addition to its coal and gas businesses, CONSOL distributes mining and industrial supplies through its Fairmont Supply unit. In 2012 37% of Fairmont's business is with its parent company.
CONSOL's revenues declined by 11% in 2012 due to lower metallurgical coal prices, slightly offset by higher thermal coal average prices as a result of renegotiated US thermal contracts. Decreased coal demand in both the thermal and metallurgical markets trimmed shipments, as did the Bailey Belt incident (when above-ground conveyor belts collapsed at a facility that brings coal from the Bailey and Enlow Fork mine in Pennsylvania, disrupting production). Gas revenues dropped due to 13.9% cut in prices, partially offset by a 2% increase in volumes sold.
The company reported net income of $388.5 million in 2012, about 39% down on 2011 as the result of lower revenues.
Facing declining demand and high debt, the company is selling noncore assets to generate cash.
The company sold its nonproducing Northern Powder River Basin assets for $170 million in cash to Cloud Peak Energy in 2012. It also sold non-core coal and mining assets in Illinois, Montana, West Virginia, Wyoming, and Western Canada. The gains from asset divestitures will be used toward paying down debt and for growth and maintenance projects.
In 2011 CONSOL sold a 50% stake in a joint venture with Noble Energy to develop 663,350 Marcellus Shale acres in Pennsylvania and West Virginia. Noble Energy paid CONSOL $3.3 billion for its 50% stake. Later in 2011 Hess Corporation paid $5954 million for joint exploration and development rights to CONSOL's nearly 200,000 Utica Shale acres in Ohio. CONSOL also sold 7% in 115,647 net acres of Marcellus Shale to Antero Resources Appalachian Corp. for $193 million.
In 2012 CONSOL, which treats more than 36 billion gallons of water annually, formed a water division to market its water resources, as well as its water treatment and management services. It is targeting gas producers in the Marcellus Shale fairway in need of fresh water and acid mine drainage sources.
Mergers and Acquisitions
In a related move, in 2012 CONSOL acquired a minority stake in Pennsylvania-based Epiphany Solar Water Systems to develop solar-powered water purification systems.
BlackRock, Southeastern Asset Management, Wellington Management Company, and T. Rowe Price Associates own 13%, 11%, 10%, and 10% of the company, respectively.