trending Market Intelligence /marketintelligence/en/news-insights/trending/qqudmaq_ehuuzi6xtkr0oq2 content esgSubNav
In This List

CONSOL Coal executives see company in 'very good shape' in 2018, beyond

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


CONSOL Coal executives see company in 'very good shape' in 2018, beyond

SNL Image

CONSOL Coal Resources LP executives said 2018 is looking good for demand for coal from the company's Pennsylvania mining complex.

Courtesy of CNX Coal Resources LP

Pennsylvania-based CONSOL Coal Resources LP told investors that it is finding opportunities and upside potential in both domestic and export coal markets.

The partnership recently completed the separation from its progenitor company's natural gas assets and is now sponsored by CONSOL Energy Inc., a pure-play coal company focused on a single mining complex in the Northern Appalachia Basin. CONSOL Coal CEO Jimmy Brock reported a "strong" fourth quarter of 2017 and expectations for improved pricing going forward into 2018. He said on a Feb. 6 earnings call that the company's mining complex hit record production volumes despite several operational challenges at the mines in 2017.

"Looking forward to '18 and beyond, we are in very good shape," Brock said shortly after the company announced net income of $11.3 million in the fourth quarter. "Even though we're almost sold out for '18, there is a meaningful potential for upside."

Specifically, Brock touted a new multiyear contract for a "significant piece of our coal export sales volume" for the second quarter of 2018 through the first quarter of 2020, consisting of approximately 70% thermal coal and 30% crossover metallurgical coal. About half of that volume is already priced, and the other half is contracted in a "collar" in which the average coal price is to be higher than the 2017 average revenue per ton to ensure that even if prices are "forced to the floor by the market," the new contract will still be above 2017 weighted-average pricing for CONSOL Coal's sales.

CONSOL Coal CFO David Khani said market participants are indicating they are more optimistic in the duration of a global coal upcycle and he believes that CONSOL Coal's open position in 2019 and beyond will allow the company to take advantage of better pricing in the future.

"Arguably, the export market is stronger today than it was in the first half of 2017, which should help drive more exports in 2018. These tons moving out of the domestic market, along with sharply declining natural gas storage levels, should help tighten the domestic market as well," Khani said. "A good indicator of this trend is the spot tons that are being sold today in the domestic market, something not seen since 2014."

Khani said CONSOL Coal is expecting 2018 volumes from the complex to increase and the market is set to "absorb all we can produce." The company reported 2018 sales guidance of 6.6 million to 6.8 million tons. Costs are estimated to be between $29.50/ton and $30.75/ton, while average revenue per ton is expected in the range of $45.75 to $47.50.

Brock said that while capital expenditures in 2017 were substantially below guidance, the partnership plans to invest that to ensure its mines remain well-capitalized. Capital expenditures were forecast to range from $31 million to $36 million. CONSOL Coal is projecting adjusted EBITDA of between $90 million and $110 million in 2018.

The partnership reported the company was more than 95% contracted for 2018, 70% contracted for 2019 and 24% contracted for 2020, assuming an annual production rate of approximately 6.8 million tons.