CONSOL Energy Announces Expected Utica Shale Investments for 2013
PITTSBURGH, Jan. 14, 2013 /PRNewswire/ -- CONSOL Energy Inc. (NYSE: CNX) expects to invest $835 - $865 million in its coal, gas, and water businesses in 2013, after adjusting for certain expected proceeds. The table below shows the components of the expected net investment.
2013 Net Investment Details ($ MM)
Less: Asset Sales
"Our net investment in 2013 reflects both our ability to invest in our organic growth opportunities in coal, gas, and liquids," commented J. Brett Harvey, chairman and CEO, "while selling assets that have more value to others. We have some flexibility in our 2013 investment plan, in both coal and gas. In our coal division, once we complete the BMX Mine, we do not expect to be investing in new major coal growth projects. So, in 2014 and beyond, we expect annual coal investments to approach maintenance-of-production levels of $5 to $6 per ton."
CONSOL Energy expects to be able to fund this 2013 net investment through cash flow from operations.
In 2013, CONSOL will receive the final annual installment of $328 million from Noble Energy. This is reflected in the asset sales category. The remainder of this category in the two cases represents a range of assumed asset sales, of between $127 million and $312 million. We believe that this range is achievable, given that the company sold assets of $350 million in 2012.
Within the coal operations category for 2013, CONSOL anticipates investing $318 million for maintenance-of-production projects. Other major items include $166 million for the BMX Mine, as well as $80 million for the Enlow Fork overland belt project. The BMX Mine is scheduled for completion during the first quarter of 2014, when 5 million annual tons of high-quality Pittsburgh seam coal will be available to be sold in either the high-vol or thermal markets. In 2012, CONSOL contracted and paid significant deposits to secure replacement longwall mining shields at three of its mining complexes and new longwall mining shields at the BMX mining complex. The company is nearing the end of a process to fund this capital commitment in a $205 million operating lease in 2013. This amount has been netted from the expected coal operations capital expenditures.
Within the gas operations category, CONSOL expects to invest about $835 - $935 million. An estimated $160 million of this is to maintain production. This figure is net of approximately $100 million in drilling carry from Hess Corporation for drilling in the Ohio Utica Shale and independent of commodity price levels. CONSOL assumes no carry from Noble Energy for drilling in the Marcellus Shale, which is dependent on natural gas being priced at or above $4.00 per MMBtu for three consecutive months. We remain focused and disciplined to drill our higher rate of return projects and benefit from the flexibility of our held-by-production (HBP) acreage position.
CONSOL plans to spend $600 million on continuing to develop its extensive Marcellus Shale assets, which includes drilling capital of $415 million. The budget anticipates that the CONSOL/Noble Energy joint venture will drill 126 (gross) horizontal Marcellus Shale wells, including 90 (gross) wells in the liquids-rich area of the play. We will continue to evaluate the number of dry gas wells that we drill in light of the commodity price curve and exercise appropriate capital discipline. CONSOL expects to invest $74 millionin related gathering and compression.
In the CONSOL/Hess Corporation joint venture in the Utica Shale, CONSOL expects to invest $122 million, with $90 million of that allocated towards drilling capital for CONSOL's share of 27 (gross) wells. Because of the drilling carry, Hess Corporation pays 75% of Utica Shale well costs, while production is split 50/50.
The coalbed methane program will again be kept at minimal drilling levels, with the expected drilling of only 63 wells. Total capital for the 2013 CBM program is estimated to be $65 million.
Across all of the gas plays, the high case includes $660 of drilling capital, $128 million of gathering and compression capital and $76 million for land.
As a result of the expected gas investment, CONSOL Energy projects its 2013 gas production to be between 170-180 Bcfe, of which 95% is expected to be dry gas. Within this range are included approximately 250 Mbbls of oil and 1,200 Mbbls of condensate/NGLs. The total production, if achieved, will be an increase of between 8 - 15%, as compared to actual 2012 production of 156.3 Bcfe.
Earnings call information:
CONSOL Energy will report additional operational and financial results for the quarter ended December 31, 2012 at 7:00 a.m. ET on Thursday, January 31, 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.
About CONSOL Energy Inc.
CONSOL Energy Inc., the leading diversified fuel producer headquartered in the Eastern U.S., is a member of the Standard & Poor's 500 Equity Index and the Fortune 500. It has 12 bituminous coal mining complexes in four states and reports proven and probable coal reserves of 4.4 billion tons. It is also a leading Eastern U.S. gas producer, with proved reserves as of December 31, 2011 of 3.5 trillion cubic feet. Additional information about CONSOL Energy can be found at its web site: www.consolenergy.com.
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 2011 Form 10-K under "Risk Factors," as updated by any subsequent Form 10-Qs, which are on file at the Securities and Exchange Commission.
SOURCE CONSOL Energy Inc.
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