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CONSOL: Separation of coal, gas business may be complete in 2017

CONSOL Energy Inc. is continuing with its plans to separate its coal and natural gas businesses and could have its plan finalized in 2017.

In its Jan. 31 earnings release, CONSOL said it was pursuing a number of different approaches to further its plan to separate the coal and exploration and production business, including the possible sale of the coal assets to a third party or a spinoff to CONSOL's shareholders.

"We think there may be a market opportunity to achieve a sale of the coal business on favorable terms or, alternatively, to effect a spin-off as our leverage ratio comes down to a level that allows each business to stand on its own," CONSOL's CFO David Khani said in a release. "At the same time, we will continue to evaluate dropdowns of additional undivided interests in the Pennsylvania mining complex."

Coal production provided the company with a net income that is lifting it a little from what is otherwise a large reported loss in the recent quarter. CONSOL's Pennsylvania mining operations division provided roughly $50.1 million net income.

Overall, the company reported a net loss attributable to shareholders of $306 million, or a loss of $1.33 per share, compared with a net income of $30.4 million, or 13 cents per share, in the corresponding 2015 period. CONSOL took a $237 million unrealized loss on commodity derivative instruments for the quarter.

CONSOL's mining operations sold 7.1 million tons in the recent quarter, compared to 5.0 million in the fourth quarter of 2015, according to the release. These sales represented a revenue of about $321.2 million in the recent quarter, compared to about $262.4 million in the same period in 2015. As reported by CNX Coal Resources LP, a master limited partnership sponsored by CONSOL, about 8.5% of these sales were to high volatile metallurgical coal markets in Asia and South America.

Analysts were recently optimistic about CONSOL's coal mining assets, saying the expected rollback of the Stream Protection Rule will likely benefit the Pennsylvania mining complex.

CONSOL's gas business held production relatively steady. The company reported average daily production of 1.1 Bcfe/d, compared to nearly 1.04 Bcfe/d in the year-ago quarter. Its margin increased to $0.50/Mcfe compared to $0.41/Mcfe in the year-ago period.