CONSOL Energy Inc the leading diversified fuel producer in the Eastern United States reported net income for the quarter ended June 30th 2012 of USD 153 million as compared to USD 77 million from the year earlier quarter. EBITDA1, a non GAAP financial measure, was USD 414 million for the quarter ended June 30th 2012. This compared to USD 321 million in the year-earlier quarter.
There were several discrete items during the quarter that affected GAAP net income, including gains from the sales of some non-core properties, a charge for reclamation and selenium at the Fola Complex, and a charge for the expiration of certain shallow gas leases. The total after-tax effect of these items was an improvement of $82 million. They are detailed in the EBITDA reconciliation table later in the release.
Mr J Brett Harvey chairman and CEO said that "We continue to manage our way through this challenging environment. In fact, we are fortunate to have generated more net income in this year's second quarter than in last year's second quarter, despite the much weaker industry and macro environment. At CONSOL, we've been working aggressively to manage costs and to raise cash by selling assets that are better suited to others."
In the Coal Division across all of its tons, CONSOL Energy had 2012 second quarter fully-load costs of USD 52.23 per ton. While this was higher than the 2011 second quarter, it represents a drop of USD 2.17 per ton from the 2012 first quarter of USD 54.40 per ton. The sequential improvement in costs per ton is even more impressive when one considers that the company produced 15.7 million tons in the 2012 first quarter and 14.6 million in the 2012 second quarter. Typically, it is more difficult to achieve unit cost savings on a lower production base.
The company attributes the unit cost improvement in coal to a combination of deflationary benefits from suppliers for items such as power, roof bolts, and diesel, as well as from re-doubled management efforts to preserve unit margins in a softer price environment in each of CONSOL's coal markets.
CONSOL Energy's efforts to sell non-core assets this year has also been very successful. The previously announced sales of non revenue producing assets has generated USD 224 million in cash, year to date.
Cash flow from operations in the quarter was USD 138 million, as compared to USD 360 million in the year-earlier quarter. CONSOL continues to invest in its future, in both coal and gas, by investing $408 million in the 2012 second quarter on capital projects.
The cash flow from operations, when combined with the cash from asset sales and the USD 328 million due from our Marcellus Shale joint venture partner, Noble Energy, Inc on September 30, means that for calendar 2012, the company has a reasonable expectation of being cash flow neutral, despite investing an expected USD 1.5 billion in maintenance and growth projects for both coal and gas.
Mr Harvey said that "While there's no doubt that CONSOL and the coal and domestic natural gas industries face strong headwinds, we think it prudent to continue to invest in our core businesses to position CONSOL to capture value for our shareholders when the upcycle occurs. CONSOL's portfolio of coal and gas assets is unique. No other company has tier-one low-vol coal, thermal coal, high-vol coal, gas, and land assets under one roof."
During the quarter, CONSOL Energy also expanded an existing mining joint venture with a privately-held company in Central Pennsylvania. The joint venture will self-fund, through retained earnings, a USD 54 million (gross) expansion in 2012 and 2013. The expansion will enable CONSOL 's share of high-vol A and mid-vol coal production to ramp from 150,000 tons in 2012 to 900,000 tons in 2015.
The term "EBITDA" is a non-GAAP financial measure, which is defined and reconciled to the GAAP net income below, under the caption "Non-GAAP Financial Measures."
Source - CONSOL Energy
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