Council boasts 2012 outlook

Consol Energy Inc., an Appalachian coal and natural-gas producer, boosted its outlook for 2012 coal shipments after reporting profit rose 16 percent on higher demand.

Net income climbed to $77.4 million, or 34 cents a share, from $66.7 million, or 29 cents, a year earlier, Pittsburgh- based Consol said today. The company was forecast to earn 72 cents, according to the mean of 10 analyst estimates compiled by Bloomberg. Sales rose 23 percent to $1.59 billion.

Consol, led by J. Brett Harvey, boosted its production forecast by 1 million tons to between 60.5 million and 62.5 million tons to capitalize on export demand for both thermal and metallurgical varieties of the fuel.

"Inventories are getting tight in the U.S., there's export demand," said Meredith Bandy, an analyst at BMO Capital Markets in Denver. "You have positive news in growing products, a better product."

Consol rose $1.10, or 2.1 percent, to $54.01 at 1:48 p.m. in New York Stock Exchange composite trading. The shares have gained 40 percent in the past year.

The company recorded a $115.5 million writedown to shutter its Mine 84 operation near Washington, Pennsylvania. Absent the expense, on an adjusted basis, net income was $174 million, or 76 cents a share.

"That's a one-time occurrence," said Jeremy Sussman, an analyst at Brean Murray Carret & Co. in New York. "Consol is growing their metallurgical coal both for the high quality and lower quality and that's a good thing."

Coal Reserves

The company decided not to sell its Amonate reserve, which contains about 240 million tons of metallurgical coal, in southern West Virginia amid growing global demand. Consol had explored selling the reserves in November.

"To accommodate future growth, we are expanding our terminal, we are developing the BMX Mine in the Pittsburgh seam, and we are restarting our Amonate Mining complex," Harvey said in the statement. "All three of these coal projects are driven by increased worldwide coal demand."

Consol, which owns an export terminal in Baltimore, plans to ship 2.3 million tons of coal to Europe this year.

It lifted 2011 production guidance this month after selling 15.4 million tons of the fuel, surpassing the previous estimate of as little as 14.75 million. Benchmark prices for coking coal, used to make steel, surged 65 percent to a record $330 a ton from a year earlier amid global supply disruptions.

Rising Costs

Consol said its cost per ton will rise $1 for both the third and fourth quarters.

"Costs are going up, but so is pricing," Bandy said. "Demand is good. Consol has low-cost mines, so it doesn't crush them like it may someone else."

Consol received $207.05 a ton for its low-volatility metallurgical coal, used by steelmakers, up 37 percent from a year earlier, it said. Low-volatility coal has fewer impurities than the higher-volatility and can withstand higher levels of heat during the process of forging steel.

Utilities in Consol's region have seen inventories dwindle as much as 13 million tons or eight to 10 days less than a year ago, company executives said on a conference call with analysts and investors today.

Consol bought Dominion Resources Inc.'s gas exploration and production business last year for $3.48 billion and spent an additional $963 million to buy the 16.7 percent of CNX Gas Corp. that it didn't already own.

The gas division produced 37.5 billion cubic feet of the fuel, up 18 percent from a year earlier, it said in the July 14 statement. It plans to produce between 150 billion cubic feet and 160 billion cubic feet this year.

Consol drills in the Marcellus and Utica shale deposits where the gas is locked in non-porous rock that made the reserves inaccessible until new drilling technologies were developed in the 1990s.

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