CONSOL Energy Takes Massive Impairment Charge, Posts Loss

Commodities & Metals

Published: July 28, 2015 8:20 am

Last Updated: April 27, 2020 7:26 pm

CONSOL Energy Inc. (NYSE: CNX) reported second quarter 2015 results before markets opened Tuesday morning. The coal and natural gas producer reported quarterly an adjusted diluted loss of $0.37 and revenues of $648.94 million. In the same period a year ago, the company reported earnings per share (EPS) of $0.07 on revenues of $937.37 million. Second-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.01 and $798.59 million in revenues.

On a GAAP basis CONSOL posted a net loss of $2.64 per share which includes an $829 million pre-tax impairment charge on the carrying value of its shallow oil and gas assets largely due to weak commodity pricing.

CEO Nicholas J. Deluliis said:

CONSOL is focused on managing through what continues to be a very challenging commodity price environment. Given this environment, we will manage the company to be free cash positive over the next 18 months, beginning in the second half of 2015. We are moving forward by resetting the company using zero-based budgeting, lean manufacturing and continuous improvement to hold our E&P production growth targets, while achieving our free cash flow targets.

In its coal division the company lowered operating costs per ton by about $2.25 per ton at its Pennsylvania operations and by nearly $10 a ton at its Virginia mines. But lower coal prices also reduced the average margin per ton (including DD&A) by about $3.25 in Pennsylvania and about $1.70 in Virginia.

The average natural gas price in the second, including hedging, totaled $2.67 per thousand cubic feet and the average realized price for all liquids was $16.52 a barrel. Natural gas production is slated to rise 30% year-over-year for the full fiscal year and by another 20% in 2016. CONSOL has hedged about half its forecast third-quarter natural gas production at an average price of $3.87 per thousand cubic feet.

Consensus estimates for the third quarter call for EPS of $0.10 on revenues of $848.4 million. For the full year analysts are expecting EPS of $0.64 on revenues of $3.4 billion. Neither of those estimates appears to be likely at this point.

The stock closed at $17.35 on Monday, down 1.6%, in a 52-week range of $15.47 to $42.26. Shares are inactive in Tuesday’s pre-market session. The consensus price target on the stock is $32.50.

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