With coal markets surging, CONSOL Energy Inc. CEO Nick DeIuliis said the company is hoping to complete the split of its coal and natural gas exploration and production businesses.
"If the market cooperates, and it's been looking more and more like the market wants to cooperate out there when it comes to coal markets, our view, our objective, is to try to get that split done in 2017," DeIuliis said Dec. 13 at an investors day. The company is the sponsor of CNX Coal Resources LP, a master limited partnership operating a Pennsylvania mining complex. CNX Coal recently boosted its ownership stake in the complex to 25%.
"It has been our base plan here to continue to drop the remaining 75% of the PA complex into CNXC," said CONSOL Executive Vice President and CFO Dave Khani. "But the way we have it modeled now — and to be conservative, we anticipate starting the drops in 2018."
However, Khani said, rising coal pricing, improving financial metrics and a rising appetite for coal investments could create an opportunity to complete the separation in 2017.
"There were also other things that we could do if we wanted to accelerate the split," Khani said. "We could spin off; we could IPO as a C Corp. the remaining 75%. So there are other options, and we will be very market-driven in how we think about the complete separation of coal and E&P."
The sale could include CONSOL's Baltimore Marine Terminal, a coal export facility with a throughput capacity of 15 million tons per year.
"That is an asset in the portfolio that we could sell," said Executive Vice President Steve Johnson. "Right now, our focus is operating that as a stand-alone business, increasing the EBITDA and increasing the value of that asset before we would consider whether to sell it or not. If there is a separation of the two businesses, the terminal naturally belongs with the coal side of the business."
Katharine Fredriksen, CONSOL's senior vice president of diversified business units and environmental affairs, said the terminal is "hands down" the best on the East Coast. This year, CONSOL began to separate the terminal as a stand-alone business and, for the first time, opened to third-party business.
"At the start of this year, it looked pretty bleak," Fredriksen said. "In fact, it was one of the bleakest outlooks for our terminal in our recent history. We forecasted to move 6.5 million tons through that terminal. But thanks to third-party contracts and an uptick in the market in the fourth quarter, we are going to move over 8.5 million tons this year, with an EBITDA of over $15 million."