CONSOL Energy Announces Operations Update; Gas Division Produces Record 40.4 Bcf, up 13% from Year-Earlier Quarter; First Five Marcellus Shale Wells at 10-Well Pad Produces Peak 39.4 MMcf/Day; Coal Division Produces 14.7 Million Tons
PITTSBURGH, Oct. 13, 2011 /PRNewswire/ -- CONSOL Energy Inc.
, the leading diversified fuel producer in the Eastern U.S., is providing an operations update for the quarter ended September 30, 2011.CONSOL Energy's Gas Division produced a record 40.4 Bcf for the quarter, or nearly 13% more than the 35.8 Bcf produced in the year-earlier quarter. The Gas Division also achieved peak production of 39.4 MMcf per day from the first five wells on a new 10-well pad in the Marcellus Shale.
CONSOL's Coal Division produced 14.7 million tons for the quarter, including 1.4 million tons of low-vol metallurgical coal from the company's Buchanan Mine.
'CONSOL's mines ran well during the quarter,' commented J. Brett Harvey, chairman and chief executive officer. 'We did have roof issues at both McElroy and Enlow Fork mines during the quarter, but we were able to meet commitments by overproducing at our other mines. This is the advantage of having a portfolio of longwall mines: if one or two mines have an issue, the others can run a little harder. We also believe that our re-engineering of the Buchanan Mine and the capital we have invested in projects such as overland belts, have meaningfully increased the reliability of our operations. Safety and reliability tend to run concurrently, and our focus on safety as a core value has also contributed to steady operations.'
As a result of producing toward the higher end of the previous guidance in the just-ended quarter, and with fine-tuning the production outlook for the current quarter, CONSOL Energy expects total fourth quarter coal production to be between 14.7 and 15.3 million tons, reflecting a normal seasonal pattern. If achieved, this would mean that annual coal production will be between 62.0 and 62.6 million tons. Buchanan Mine fourth quarter production is expected to be between 1.0 - 1.2 million tons. If achieved, this would mean that annual production of low-vol coal will be between 5.3 - 5.5 million tons.
Thermal coal inventories remained unchanged at 1.6 million tons during the quarter, as sales matched production. Low-vol Buchanan inventory decreased from June 30, 2011 by 0.1 million tons, to 0.1 million tons.
The company expects its 2011 gas production, on a 100%-basis, to be approximately 160 Bcf. This is at the high end of earlier guidance. However, because of the sale of one-half of the flowing Marcellus production to Noble Energy as part of the joint venture in the Marcellus Shale, and the sale of an overriding royalty interest (ORRI) to Antero, CONSOL Energy expects its net gas production to be between 150 - 152 Bcf for the year. Fourth quarter gas production, net to CONSOL is expected to be approximately 36 - 38 Bcf.
The company has drilled 58 wells in the Marcellus Shale in the first nine months of 2011. The geographic breakdown, by region, is as follows: 36 in Southwest Pennsylvania, 16 in Central Pennsylvania, and six in Northern West Virginia. The company now expects to drill about 80-85 Marcellus Shale wells in 2011.
In Central Pennsylvania, CONSOL has finished drilling and fracing all ten wells on the Hutchinson pad in northwestern Westmoreland County. The table on the next page summarizes the peak daily production from the first five wells to be turned online. CONSOL intends to provide 30-day rates for the wells on this pad in November.
24-Hour
Well # Date Rate Lateral # Frac
------ On-Line (MMcf) Length Stages
------- ------ ------ ------
E Oct. 3 9.0 3,209 11
A Oct. 5 6.5 2,639 9
F Oct. 7 5.2 2,154 8
G Oct. 9 12.2 4,711 17
H Oct. 11 6.5 5,240 18
--- ----- ---
Total 39.4 17,953 63
----- ---- ------ ---
The 10-well Hutchinson pad, the company believes, is the industry's largest single pad drilled to date in the Marcellus Shale. The 10 wells were drilled and completed for approximately $48 million, with drilled laterals cased and completed totaling 41,200 feet. The longest of the 10 laterals was 5,517 feet. The pad had 138 continuous frac stages, which used 47 million pounds of sand and 47 million gallons of water.
This pad highlights CONSOL's competitive advantage in the Marcellus Shale. With limited acreage expiration, CONSOL can efficiently drill wells on large pads, instead of drilling to hold acreage. Larger pads, the company believes, should result in lower unit operating costs, while minimizing the number of permits needed for pads, gathering systems, and stream crossings.
Central Pennsylvania Gas Ops currently has one rig drilling on the 8-well Aikens pad in Westmoreland County.
In Southwestern Pennsylvania, CONSOL continues its full-scale development drilling at several Nineveh pads in Greene County. Wells completed include the 5-well NV-29 pad, the 6-well NV-15 pad, and the 2-well GH-35 pad. Across the 13 wells, 24-hour rates ranged from 2.9 MMcf - 7.2 MMcf, with a mean rate of 4.2 MMcf. There were 122 continuous frac stages for these three pads.
Southwest Pennsylvania Gas Ops currently has two rigs drilling in Greene County, Pa. and a third rig drilling on the SHL-1 pad in the company's Majorsville area, in Marshal County, W. Va. The SHL-1 pad is CONSOL's first pad in what is believed to be the liquids-rich portion of the Marcellus Shale play.
In Northern West Virginia, CONSOL began flowing production from two wells drilled on the Phillipi pad in Barbour County. The Phillipi 1A had a 24-hour rate of 4.2 MMcf, while the Phillipi 1C produced at 3.2 MMcf.
The rig operating in Northern West Virginia has now moved back to Upshur County to drill a second Alton pad, this one containing six wells.
CONSOL Energy will report additional operational and financial results for the quarter ended September 30 at 7:00 a.m. ET on Thursday, October 27, followed by a conference call at 10:00 a.m. ET. The call can be accessed at the investor relations section of the company's web site, at www.consolenergy.com.
Forward-Looking Statements
Various statements in this release, including those that express a belief, expectation or intention, may be considered forward-looking statements (as defined in Section 21E of the Exchange Act) that involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. When we use the words 'believe,' 'intend,' 'expect,' 'may,' 'should,' 'anticipate,' 'could,' 'estimate,' 'plan,' 'predict,' 'project,' or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this press release, if any, speak only as of the date of this press release; we disclaim any obligation to update these statements. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following: deterioration in economic conditions in any of the industries in which our customers operate, or sustained uncertainty in financial markets cause conditions we cannot predict; an extended decline in prices we receive for our coal and gas affecting our operating results and cash flows; our customers extending existing contracts or entering into new long-term contracts for coal; our reliance on major customers; our inability to collect payments from customers if their creditworthiness declines; the disruption of rail, barge, gathering, processing and transportation facilities and other systems that deliver our coal and gas to market; a loss of our competitive position because of the competitive nature of the coal and gas industries, or a loss of our competitive position because of overcapacity in these industries impairing our profitability; our ability to negotiate a new agreement with the United Mine Workers' of America and our inability to maintain satisfactory labor relations; coal users switching to other fuels in order to comply with various environmental standards related to coal combustion emissions; the impact of potential, as well as any adopted regulations relating to greenhouse gas emissions on the demand for coal and natural gas, as well as the impact of any adopted regulations on our coal mining operations due to the venting of coalbed methane which occurs during mining; foreign currency fluctuations could adversely affect the competitiveness of our coal abroad; the risks inherent in coal and gas operations being subject to unexpected disruptions, including geological conditions, equipment failure, timing of completion of significant construction or repair of equipment, fires, explosions, accidents and weather conditions which could impact financial results; our focus on new gas development projects and exploration for gas in areas where we have little or no proven gas reserves; decreases in the availability of, or increases in, the price of commodities and services used in our mining and gas operations, as well as our exposure under 'take or pay' contracts we entered into with well service providers to obtain services of which if not used could impact our cost of production; obtaining and renewing governmental permits and approvals for our coal and gas operations; the effects of government regulation on the discharge into the water or air, and the disposal and clean-up of, hazardous substances and wastes generated during our coal and gas operations; the effects of stringent federal and state employee health and safety regulations, including the ability of regulators to shut down a mine or well; the potential for liabilities arising from environmental contamination or alleged environmental contamination in connection with our past or current coal and gas operations; the effects of mine closing, reclamation, gas well closing and certain other liabilities; uncertainties in estimating our economically recoverable coal and gas reserves; costs associated with perfecting title for coal or gas rights on some of our properties; the outcomes of various legal proceedings, which are more fully described in our reports filed under the Securities Exchange Act of 1934; the impacts of various asbestos litigation claims; increased exposure to employee related long-term liabilities; increased exposure to multi-employer pension plan liabilities; minimum funding requirements by the Pension Protection Act of 2006 (the Pension Act) coupled with the significant investment and plan asset losses suffered during the recent economic decline has exposed us to making additional required cash contributions to fund the pension benefit plans which we sponsor and the multi-employer pension benefit plans in which we participate; lump sum payments made to retiring salaried employees pursuant to our defined benefit pension plan exceeding total service and interest cost in a plan year; acquisitions that we recently have completed or may make in the future including the accuracy of our assessment of the acquired businesses and their risks, achieving any anticipated synergies, integrating the acquisitions and unanticipated changes that could affect assumptions we may have made and divestitures we anticipate may not occur or produce anticipated proceeds; the anti-takeover effects of our rights plan could prevent a change of control; increased exposure on our financial performance due to the degree we are leveraged; replacing our natural gas reserves, which if not replaced, will cause our gas reserves and gas production to decline; our ability to acquire water supplies needed for gas drilling, or our ability to dispose of water used or removed from strata in connection with our gas operations at a reasonable cost and within applicable environmental rules; our hedging activities may prevent us from benefiting from price increases and may expose us to other risks; and other factors discussed in this 2010 Form 10-K under 'Risk Factors,' as updated by any subsequent Form 10-Qs, which are on file at the Securities and Exchange Commission.
CONSOL Energy Inc.
CONTACT: Investors: Brandon Elliott, 1-724-485-4526, or Dan Zajdel,
1-724-485-4169, or Media: Lynn Seay, 1-724-485-4065
Web site: http://www.consolenergy.com/