CONSOL Energy Announces Operations Update; Gas Division Produces 39.7 Bcf in Quarter, up 15% (Adjusted) from Year-Earlier Quarter; EURs of 21 New Marcellus Wells Average 5.8 Bcf; Coal Division Produces 15.3 million tons in Quarter
PITTSBURGH, Jan. 17, 2012 /PRNewswire/ -- CONSOL Energy Inc. the leading diversified fuel producer in the Eastern U.S., is providing an operations update for the quarter ended December 31, 2011.'Once again, CONSOL's mines and gas operations ran well during the quarter,' commented J. Brett Harvey, chairman and chief executive officer. 'In fact, we closed the year with our best December safety performance in recent years. We're looking to carry that momentum into 2012.'
CONSOL's Coal Division produced 15.3 million tons for the quarter, including 1.4 million tons of low-vol metallurgical coal from the company's Buchanan Mine. Annual 2011 coal production was 62.6 million tons, up slightly from the 62.4 million tons produced in 2010.
CONSOL Energy's Gas Division produced 39.7 Bcf for the 2011 fourth quarter, or 15% more than the 34.4 Bcf produced in the 2010 fourth quarter, as adjusted for the subsequent sale of 1.8 Bcf of that quarter's production to Noble Energy and Antero Resources. Annual 2011 gas production was 153.5 Bcf (net to CONSOL). During the quarter, 21 Marcellus Shale wells were placed online. These Pennsylvania wells, which included 10 in Westmoreland County, and 11 in Greene County, had average expected ultimate recoveries (EURs) of 5.8 Bcf per well.
First Quarter 2012 Forecasts
Coal: CONSOL Energy expects first quarter 2012 total coal production to be between 15.5 - 15.9 million tons, reflecting a normal seasonal pattern. Annual 2012 total coal production guidance remains unchanged, at 59.5 - 61.5 million tons. Buchanan Mine's first quarter production is expected to be between 1.0 - 1.2 million tons, while annual production guidance remains unchanged at 4.5 - 5.0 million tons.
Gas: As previously announced, CONSOL Energy expects its 2012 gas production to be approximately 160 Bcf (net to CONSOL). First quarter 2012 gas production, net to CONSOL, is expected to be approximately 36 - 38 Bcf, or slightly lower than the 39.7 Bcf produced in the fourth quarter of 2011, as frac schedules and other seasonal factors are expected to limit wells tied into line.
Coal Division Operations
Buchanan Mine set an annual production record of nearly 5.7 million tons in 2011, including 1.4 million tons in the fourth quarter. Shoemaker Mine also set an annual production record of 5.1 million tons.
CONSOL's total coal inventory increased during the quarter by 0.1 million tons to 1.8 million tons as of December 31, 2011. Thermal coal inventory remained unchanged at 1.6 million tons during the quarter, because sales matched production. Low-vol Buchanan inventory increased from September 30, 2011 by 0.1 million tons, to 0.2 million tons.
Gas Division Operations
CONSOL Energy had a very successful 2011 Marcellus Shale drilling program. In 2011, in the Marcellus Shale Joint Venture with Noble Energy, 78 gross wells were drilled, all by CONSOL. The geographic breakdown is as follows: 19 in Central Pennsylvania, 50 in Southwest Pennsylvania, and 9 in Northern West Virginia. Total daily (net) Marcellus Shale production nearly doubled from 40 MMcf per day as of December 31, 2010 to 77.5 MMcf per day as of December 31, 2011. During 2011, 57 horizontal wells were placed online. Total well costs averaged $5.0 million per well. The average completed lateral was 3,853 feet (or, 3,367 perf-to-perf), with twelve frac stages. Maximum 24-hour production averaged 5.0 MMcf per well, while peak 30-day production averaged 3.5 MMcf per well per day. EURs averaged 5.2 Bcf per well.
Central PA: During the fourth quarter of 2011, CONSOL Energy continued to successfully de-risk its huge Marcellus Shale acreage position with the 10-well Hutchinson pad in northwestern Westmoreland County. As earlier reported, 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 (or, 3,983 feet per well, perf-to-perf). The pad had 138 continuous frac stages, which used 47 million pounds of sand and 47 million gallons of water.
This pad had 24-hour peak production of 8.3 MMcf per well, and 30-day peak production of 4.2 MMcf per well, along with an average EUR of 4.9 Bcf per well.
In Central Pennsylvania, CONSOL Energy currently has two rigs drilling.
Southwest PA: CONSOL continues its full-scale development drilling at several Nineveh pads in Greene County. During the fourth quarter, CONSOL brought 13 wells online at several pads with (perf-to-perf) laterals averaging 3,491 feet. These wells had 24-hour peak production of 4.6 MMcf per well, and 30-day peak production of 4.0 MMcf per well, along with an average EUR of 6.5 Bcf per well.
In Southwest Pennsylvania, CONSOL Energy currently has two rigs drilling, and Noble Energy has one drilling in the liquids-rich area of the play.
Northern WV: In Barbour County, where the company has extensive acreage, two wells were drilled and completed during 2011 with laterals of approximately 4,000 feet. These Phillipi-1 wells have average EURs of 5.3 Bcf per well. Four wells were also drilled in 2011 in Upshur County, on the southern fringe on CONSOL's holdings, with laterals averaging 3,200 feet. Three of these Alton-1 wells have average EURs of 2.3 Bcf per well. A fourth had mechanical issues and was abandoned. CONSOL Energy currently has one rig drilling in Northern West Virginia.
Ohio Utica: In the Utica Shale Joint Venture with Hess Corporation, CONSOL Energy has a rig drilling in the western portion of Tuscarawas County, Ohio.
CONSOL Energy will report additional operational and financial results for the quarter ended December 31, 2011 at 7:00 a.m. ET on Thursday, January 26, 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.
Cautionary 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; 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 and joint ventures that we recently have completed or entered into 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 including joint venture partners paying anticipated carry obligations; 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 the 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.
The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible oil and gas reserves that a company anticipates as of a given date to be economically and legally producible and deliverable by application of development projects to known accumulations. We may use certain terms in this press release, such as EUR (estimated ultimate recovery), unproved reserves and total resource potential, that the SEC's rules strictly prohibit us from including in filings with the SEC. These measures are by their nature more speculative than estimates of reserves prepared in accordance with SEC definitions and guidelines and accordingly are less certain. We also note that the SEC strictly prohibits us from aggregating proved, probable and possible reserves in filings with the SEC due to the different levels of certainty associated with each reserve category.
CONSOL Energy Inc.
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Web site: http://www.consolenergy.com/