Consol Energy sells coal assets, looks to boost natural gas production
Consol Energy has been mining coal since the American Civil War, but today the Cecil-based company has announced it is selling the subsidiary that started it all.
Murray Energy Corp. will pay $850 million in cash for the Consolidation Coal Company, including five mines in West Virginia. The Ohio-based mining company will also buy up Consol’s river transportation operations. Consol says it will be keeping five mines, including two in Pennsylvania, in order to keep up with the overseas demand for coal, and plans to reinvest in natural gas production.
The sale comes at a time when American coal producers are on the defense.
More from the Pittsburgh Tribune-Review:
Consol executives have pleaded with investors for months. They and several analysts claimed the company is undervalued, dragged down by negativity surrounding coal.
Consol has been losing stock value and money in recent quarters despite producing more coal at rates faster than it expected. Coal companies have struggled with oversupply, competition from cheap gas and fears about climate change and tightening federal regulations.
Company leaders worked for about 18 months to try to make a transition. This summer the company produced a loss for the third time in four quarterly reports.
Amid the shifting energy market, Consol has jumped on the natural gas bandwagon and has been actively drilling in Pennsylvania and West Virginia. The Pittsburgh Tribune-Review reports the company already has 259 shale gas wells in the Keystone State and it’s not stopping there:
The company plans to produce the equivalent of about 220 billion cubic feet of gas in 2014, according to its announcement. Then it plans to increase production by 30 percent a year starting in 2015, using money and capital freed up by the sale and by cutting its dividend, it said.
Most of that work will happen in West Virginia and Pennsylvania. It will spend about $14 billion to grow its gas production in West Virginia and $8 billion to $10 billion in Pennsylvania over 10 years, according to sources close to the transaction.
John Pippy, CEO of the Pennsylvania Coal Alliance, refutes the notion that coal and natural gas are in competition for dominance in America’s energy market. Consol Energy is one of the alliance’s biggest members and Pippy told StateImpact Pennsylvania it isn’t the only company that has its hands in both the coal mines and the gas fields.
“That’s I think good business sense,” Pippy said. “They have a robust presence in both.”