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CONSOL Energy reports net loss despite lower costs, record gas production

CONSOL EnergyInc. reported a net loss of $468.6 million on July 26 even thoughthe company reported record quarterly natural gas production and decreasedoperating costs.

The results come the day after CONSOL announced it had soldits Miller Creek and Fola coal assets, both Central Appalachia mines with atotal of 114 million tons of coal reserves and a total of $103 million of mineclosing and reclamation obligations. Booth Energy Group will receive $44 million totake the mines andtheir liabilities from CONSOL.

After adjustment, CONSOL reported an adjusted net loss fromcontinuing operations in the second quarter of $49 million, or 21 cents perdiluted share. Including the loss from discontinued operations, net of $236million in tax, the company reported net loss of to shareholders of $470million, or $2.05 per share. The S&P Capital IQ consensus normalized EPS estimate for the recentquarter was a loss of 19 cents.

"Duringthe quarter, CONSOL drove down E&P unit costs by 18%, compared to theprior-year quarter, generated $46million in organic freecash flow from continuing operations, paid down approximately $390 million in debt, and increasedestimated ultimate recoveries in its prolific Marcellus Shale Green Hill field to 3.0-3.5 Bcfe,"said NicholasDeIuliis, CONSOL  president andCEO.

He saidCONSOL exceeded its internal 18-month free cash flow and pushed its liquidityposition and net asset value, or NAV, per share higher in the quarter.

"Asa result, we have made the decision to employ a two-rig program in the secondhalf of 2016 since expected rates of return nicely exceed our cost of capital,while supporting our free cash flow plan and liquidity goals," DeIuliissaid. "Despite the decision to resume modest drilling activity, which willadd approximately $25million of capitalexpenditures in 2016, CONSOL expects the annual E&P Division capital budgetto decrease to $190-$205million due to continuedcapital efficiency improvements. CONSOL's main focus remains stayingdisciplined on deploying capital in order to grow our NAV per share."

As of June 30, 2016, CONSOLreported $1.31 billion in totalliquidity, which is comprised of $88.7million of cash, excluding itsmaster limited partnership's cash balance, and $1.23billion available to beborrowed under its $2.0billion bank facility.CONSOL reported using $66.3 million of freecash flow generated during the quarter and the $426.7million of the cash on handfrom March 31 to reduce its outstanding borrowings, delevering its balancesheet.

"Whilewe have seen the industry issue equity to improve liquidity and manage leverageratios, CONSOL has focused on cutting costs, improving capital efficiencies,and monetizing assets," said DavidKhani, executive vice president and CFO. "Over the past twoyears, the company has reduced administrative costs and legacy liabilities byseveral hundred million dollars per year, reduced E&P operating cash costson a per unit basis by approximately 34%, and sold over $1.3 billion of assets."

CONSOL'smaster limited partnership, CNXCoal Resources LP reported quarterly coal sales were at the highest levelsince early 2015.